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Whereas some points have lengthy induced friction, a lot of what the U.S. president says does not stand as much as truth checking
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Printed Apr 01, 2025 • 5 minute learn
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U.S. President Donald Trump gestures whereas talking throughout an govt order signing occasion within the Oval Workplace of the White Home on March 31, 2025 in Washington, DC. Picture by Andrew Harnik/Getty Pictures/Postmedia recordsdata
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On April 2, the USA is scheduled to unveil reciprocal tariffs on a wide selection of buying and selling companions, together with Canada. Dubbed “Liberation Day” by U.S. President Donald Trump, the measures are supposed to even issues out with those that, in Trump’s eyes, have unfairly taken benefit of the U.S. with tariffs and different non-tariff obstacles.
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To date, there are conflicting reviews of how the tariffs will unfold, with some administration officers publicly indicating they are going to be rolled out nation by nation and different reviews pointing to the potential for a flat levy of 20 per cent on merchandise from just about each nation.
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Except for metal, aluminum and autos, that are already dealing with separate tariffs, listed here are the problems the U.S. has singled out as problematic of their commerce with Canada that might consider to the Liberation Day announcement, and what economists and commerce officers need to say about them.
The commerce imbalance
What Trump says: He has been broadly disparaging of the commerce relationship with Canada, repeatedly lamenting that the U.S. subsidizes Canada to the tune of US$200 billion.
Actuality Verify: There appears to be little rationalization for the US$200 billion subsidy determine — firstly as a result of a commerce deficit isn’t a subsidy and secondly as a result of the deficit is barely US$100 billion. The imbalance in commerce, with Canada exporting extra to the USA than we import from them, is generally resulting from Canada’s exports of oil, pure fuel and electrical energy. In accordance with Statistics Canada, vitality merchandise alone made up one third of Canada’s exports to the USA in 2022. The figures additionally fail to account for companies, the circulate of human capital and the myriad different methods our economies are intertwined, to mutual profit.
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Dairy
What Trump says: Canada imposes tariffs on U.S. dairy which are better than 200 per cent, thereby “ripping off” American farmers. Canada “has been ripping us off for years,” he declared from the Oval Workplace on March 7.
Actuality Verify: Whereas tariffs utilized to U.S. dairy imports above a tariff-free quota are certainly 200-per-cent-plus — larger than the U.S. applies for its above-quota volumes — the U.S. doesn’t even export the complete quantity of tariff-free dairy product to Canada. “To be clear, no U.S. entity pays these excessive tariffs presently, and it’s troublesome to see a state of affairs wherein one would — they nonetheless have current quota room!” analysts at CIBC Capital Markets mentioned in a March 26 observe.
Furthermore, they mentioned, the US$1 billion of U.S. dairy exports to Canada yearly are “extraordinarily profitable” for U.S. farmers as a result of Canadian customers pay a lot larger costs than these within the U.S. That is the results of Canada’s dairy provide administration system, developed greater than half a century in the past. The system doesn’t prioritize cost-cutting and effectivity since advertising boards pay farmers primarily based mostly on their price of manufacturing plus an inflation adjustment.
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As well as, there was much less consolidation in Canadian farming, leading to larger manufacturing prices in Canada. These larger prices are handed onto Canadian customers of dairy merchandise from each Canada and the U.S. “In a perverse approach, Canadian customers are not directly subsidizing U.S. dairy farmers,” the CIBC analysts wrote.
Lumber
What Trump says: He has lumped his anger about dairy and lumber tariffs collectively, threatening to behave instantly on unfair remedy by Canada. He additionally mentioned the U.S. doesn’t want any Canadian lumber.
Actuality Verify: There may be removed from sufficient lumber produced within the U.S. to satisfy constructing demand, in accordance with trade teams, which have mentioned about 30 per cent of softwood lumber used within the U.S. comes from Canada. They warned new tariffs would push up constructing prices and doubtlessly make properties much less inexpensive. What’s extra, Canadian producers already pay duties after they export wooden to the USA.
In accordance with the Nationwide Affiliation of House Builders, a brand new tariff on softwood lumber merchandise from Canada would come on prime of an efficient 14.5 per cent responsibility charge that’s already in place. A 25 per cent tariff, if imposed by Trump, would push the efficient Canadian lumber tariff to just about 40 per cent.
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“The lumber piece is especially egregious given the already punitive and unjustified anti-dumping and anti-subsidy (countervailing) duties in place on Canadian lumber flowing into the USA,” William Pellerin, a accomplice within the worldwide commerce apply at legislation agency McMillan LLP and former deputy director at World Affairs Canada, mentioned after Trump’s March 7 threats.
The digital companies tax
What Trump says: Tariffs have to be levied on Canada in retaliation for digital gross sales taxes on know-how corporations whose companies can be found to Canadian customers. The U.S. administration says these taxes penalize American corporations and acceptable the American tax base. “Solely America must be allowed to tax American corporations,” Trump mentioned in a White Home assertion.
Actuality Verify: Affected corporations equivalent to Google mother or father Alphabet Inc., Fb proprietor Meta Platforms Inc., Apple Inc. and Amazon.com Inc. have lobbied towards such a tax for years, arguing that they need to not pay taxes in international locations the place they don’t have a bodily presence. However the record of nations imposing such taxes, which incorporates France, Britain and several other European Union nations, has been rising.
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Canada’s digital tax regime went into impact final June, retroactive to 2022. Digital corporations that earn greater than $1.1 billion worldwide are topic to a 3 per cent tax on Canadian revenues above $20 million. American corporations can pay US$500-million a 12 months in digital gross sales taxes in Canada, in accordance with the White Home. That is seen by some commerce consultants as a possible bargaining chip for Canada to indicate it isn’t unwilling to make some concessions.
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The banking sector
What Trump says: Canada “doesn’t permit American Banks to do enterprise in Canada,” which upsets him as a result of Canadian banks have a big footprint in the USA.
Actuality Verify: U.S. banks don’t have an enormous presence in Canada, notably relative to Canada’s six massive banks, which dominate most enterprise traces. However they’re allowed to arrange in Canada and have, certainly, established toeholds right here through the years, notably in funding banking and advisory companies. As of February, there have been 16 U.S financial institution subsidiaries and branches working in Canada, with about $113 billion in belongings, representing about half of all overseas financial institution belongings within the nation, in accordance with the Canadian Bankers Affiliation.
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That mentioned, a mix of strict laws and the focus of enormous home gamers makes it cumbersome and costly to broaden into retail banking in Canada. In an effort to turn out to be a standard deposit-taking retail financial institution that may settle for deposits of lower than $150,000, a U.S. financial institution has to arrange a Canadian subsidiary, which is required to have its personal capital and liquidity construction separate from the united statesparent.
In contrast, Canadian banks, equivalent to Financial institution of Montreal, Toronto-Dominion Financial institution, and Royal Financial institution of Canada, can and have bought billion-dollar U.S. retail banks with intensive department networks throughout America.
• Electronic mail: bshecter@nationalpost.com
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