Trudeau and Trump pause tariffs, but economic concerns persist as both sides prepare for potential fallout
Canada and the United States have avoided an immediate trade war after US President Donald Trump agreed to a 30-day delay on tariffs targeting Canadian imports.
The pause follows discussions between Trump and Canadian Prime Minister Justin Trudeau, with both sides agreeing to explore further negotiations on border security and drug trafficking concerns, as reported by the Associated Press.
Trump had initially directed 25 percent tariffs on Canadian imports, excluding energy, which was to be taxed at 10 percent.
In response, Trudeau announced counter-tariffs on $30bn in US goods, with plans to increase them to $155bn later in the month.
According to BNN Bloomberg, this escalation was set to impact industries on both sides of the border.
Trudeau confirmed the delay on X, stating, “Proposed tariffs will be paused for at least 30 days while we work together.”
I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly…
— Justin Trudeau (@JustinTrudeau) February 3, 2025
He further announced Canada’s commitment to appointing a ‘Fentanyl Czar,’ designating Mexican cartels as terrorist organizations, and establishing a Canada-US Joint Strike Force to combat organized crime, fentanyl, and money laundering.
The Associated Press noted that Mexico also reached a similar agreement with Trump, securing a one-month reprieve on tariffs after pledging to reinforce its border with 10,000 members of the national guard.
Despite the delay, concerns remain over the long-term economic impact of the proposed tariffs.
The Canadian Chamber of Commerce previously warned that a full imposition of the tariffs could shrink Canada’s GDP by 2.6 percent. This could cost the average Canadian $1,900 annually.
The US economy could see a 1.6 percent reduction, translating to a $1,300 per household impact.
According to BNN Bloomberg, political leaders across Canada reacted to the tariff delay with caution.
Opposition Leader Pierre Poilievre urged the government to strengthen the economy, stating on X, “We must urgently work to strengthen Canada’s economy and do everything we can to ensure these tariffs are never brought in.”
Like Canadians across the country, Conservatives are relieved to hear that there will be a one month pause on tariffs from the United States that would have hurt workers, families and businesses on both sides of the border.
— Pierre Poilievre (@PierrePoilievre) February 3, 2025
But this is not a time to sit back. We must urgently…
He also challenged the Liberal government to recall Parliament.
NDP Leader Jagmeet Singh echoed concerns that Trump’s threats would persist, stating, “We need to make our economy less reliant on unreliable allies.”
Unifor President Lana Payne characterized the tariff announcement as “a turning point for our country,” warning that “no one should let their guard down” and urging a strategy to prepare for a potential trade war.
Canada’s Ambassador to the UN, Bob Rae, highlighted the vulnerability of the Canada-US-Mexico free trade agreement, telling CTV News, “We have to keep on negotiating in good faith. How do we make sure that this economy works more effectively?"
Rae also emphasized the need for civil discourse but added, “Don’t mess with Canada.”
Provinces have taken their own measures in response to Trump’s tariff threats.
Ontario Premier Doug Ford welcomed the 30-day delay and announced that the province would pause all retaliatory actions. However, he cautioned that “President Trump will continue to use the threat of tariffs to get what he wants.”
Ford also announced Ontario’s decision to cancel its $100m contract with Elon Musk’s Starlink and to stop selling American liquor products at the LCBO. According to BNN Bloomberg, Manitoba and Quebec have implemented similar bans on US liquor.
The Canadian Mental Health Association Ontario raised concerns over the broader social impact of tariffs, stating that economic instability could increase mental health and addiction issues.
“Workers in industries affected by the tariffs, including automotive, construction, agriculture, forestry, and mining, are especially likely to experience increased strain on their mental health,” the organization said in a statement.
The restaurant and retail sectors also expressed concerns.
Restaurants Canada CEO Kelly Higginson told CTV News that the tariffs could impact food costs, stating, “We do have a lot of our suppliers who are scrambling, cancelled trucks coming into the country today filled with produce to feed Canadians.”
Grocers, such as Vince’s Market, have started labeling domestic products to encourage consumers to buy Canadian, according to BNN Bloomberg.
Meanwhile, Trump continued to defend the tariffs, writing on Truth Social that they were necessary for securing the US border and addressing fentanyl trafficking.
“Tariffs are very powerful both economically and in getting everything else you want,” he told reporters, suggesting that the size of the US economy gave it a strategic advantage.
White House Press Secretary Karoline Leavitt reiterated that the tariffs were not part of a trade war but a “drug war,” according to the Associated Press.
However, Trump also hinted at future tariffs against the European Union, stating, “If we can’t make a deal with China, then the tariffs will be very, very substantial.”
The Associated Press reported that US Democratic leaders have warned about the domestic impact of the tariffs.
Senate Democratic Leader Chuck Schumer cited research from the Budget Lab at Yale University, noting that the average American household could see yearly expenses rise by over US$1,200 due to tariffs on Canadian and Mexican goods.
Senator Maggie Hassan raised concerns about rising home heating oil costs in New Hampshire, while the United Auto Workers (UAW) union warned that tariffs could disrupt supply chains and lead to job losses.
Markets reacted with caution to the tariff announcements.
North American markets opened lower, with the S&P/TSX Composite Index down 2.58 percent and the S&P 500 Index falling 1.37 percent, according to BNN Bloomberg.
Cryptocurrency markets also saw declines, with Bitcoin dropping below $100,000 amid fears of a trade war.
Despite the temporary reprieve, Canada continues to prepare countermeasures.
The Canadian government released a list of US goods that will face tariffs if Trump moves forward with his plans.
According to the Associated Press, these goods include dairy products, alcohol, coffee, fruits, vegetables, apparel, and industrial materials such as aluminum and steel.
Trudeau has urged Canadians to “choose products made right here in Canada,” emphasizing the importance of supporting domestic businesses.
With the 30-day pause in place, both Canada and Mexico now have additional time to negotiate with the US and potentially prevent the tariffs from taking full effect.
However, as BNN Bloomberg noted, the situation remains fluid, with Trump’s rhetoric suggesting that tariff threats may persist beyond the current reprieve.
