The trade war U.S. President Donald Trump ignited has against America’s biggest trading partners is only the beginning. The European Union is next in his sights, as is Taiwan’s semiconductor industry.
Yes, Trump declared a temporary reprieve of the protectionist measures against Canada and Mexico. But that is of no help to business. Uncertainty still reigns. Lawsuits will surely follow.
In the meantime everyone is scrambling to make sense of it all and trying to figure out what’s next and what to do. Here is a brief compendium of how experts see the unfolding events.
The list of products that may be subjected to the 25 per cent levy is huge: Here’s a list compiled by the Department of Finance Canada.
The term tariff is regularly being bandied about. But what are they? Norton Rose Fulbright has a good primer on these trade measures, providing an introduction on who pays for them, who collects them and how they are collected, amongst other things.
“Customs tariffs are a duty applied to goods at the time of importation. The rate of duty is typically expressed as a percentage of the value of the good and depends on the imported good’s customs classification, value, and country of origin.
“Most trading nations, including Canada and the United States, use the Harmonized System (HS) as the basis for their systems of determining the customs classifications of goods.”
Source: Tariffs 101: What you need to know about tariffs in the new Trump era
Canada’s central bank makes no bones about it: Sweeping tariffs will be “highly disruptive” to the Canadian and American economies.
“In general, the economic impacts for a country imposing import tariffs depend critically on how easily businesses and households can find non-tariffed substitutes. When substitutes do not exist or cannot easily be produced in higher quantities due to capacity constraints, tariffs are more disruptive to the real economy and lead to higher inflation.
“At a minimum, a permanent tariff will cause a one-time, permanent increase in price levels. Whether tariffs lead to ongoing inflation will mostly depend on how household and business expectations for inflation respond to tariff-related price level increases.
“In Canada, a trade conflict would negatively affect both exports and imports.”
Source: Evaluating the potential impacts of US tariffs
Isabelle Hudon, the president and CEO of the Business Development Bank of Canada, remarked recently that the financial institution is “getting a lot of questions about how to prepare.”
“We are receiving a lot of anxious messages. You can feel the weight of the threat. Entrepreneurs call on us not necessarily to obtain additional capital, but how to think about (what’s going on).
Isabelle Hudon on the televison show 24-60 on 07 Feb 2025
A guide prepared by Gowling WLG outlines practical strategies as well as proactive measures organizations can take in these stormy times. It suggests organizations:
1. Understand how tariffs work
2. Understand key risk due to tariffs
3. Assess risks and rights under contracts
4. Explore inventory and supply chain management strategies to mitigate tariffs
5. Review overall trade compliance to minimize duties payable
6. Consider availability of, and, eligibility for tax deductions
7. Engage in advocacy like industry and cross-border collaboration
8. Pursue exclusions and exemptions
Source: Preparing for tariffs: A guide for North American importers and exporters
Quebec business should explore new markets and alternative supply chain strategies, says Langlois Lawyers.
“Québec businesses have historically relied on a stable and predictable trade relationship with the U.S. That reality has changed. Moving forward, more precise and tailored agreements are essential to mitigate volatility and protect profitability.”
Source: New U.S. tariffs: Key legal and business considerations for Québec businesses
Canada, and business, are widely expected to mount legal challenges to challenge against Trump’s looming tariffs. His use of the U.S. National Emergencies Act likely violates trade laws, according to legal experts in a piece by The Logic.
“Trump’s approach to imposing tariffs “blatantly violates” both the United States-Mexico-Canada Agreement (USMCA) and World Trade Organization agreements, said Gus Van Harten, professor at Osgoode Hall Law School of York University. If Canada and Mexico pursue the U.S. in international courts, they’ll most likely win—and then “watch the U.S. disrespect the arbitral award,” Van Harten claimed. Canada might win legally, but lose economically, he said.
“The lack of a “clear connection between the national emergency and the trade restrictions raises serious concerns—both legal and diplomatic,” said Barry Appleton, co-director and senior fellow of the Center for International Law at New York Law School.”
International state-to-state tribunals are an option that Canada and Mexico might explore, suggests Appleton.
Source: Canada has ‘strong case’ to launch legal challenge against Trump’s tariffs (The article is behind a paywall but can be read for free if you provide them with your email.)
Canada is finally looking at dismantling trade barriers to interprovincial trade. These barriers, also referred to as non-tariff barriers, usually stem from differing provinces’ laws, regulations, standards or certifications, notes Torys LLP.
“The result of these non-tariff barriers is that, in practice, it may be more efficient for a Canadian company in one province to trade with another free-trading country than another Canadian province.”
Source: Canada takes on internal trade barriers
What lays ahead, and what is the Trump’s administration hoping to achieve. Stephen Miran, the nominee to serve as the White House’s next Chair of the Council of Economic Advisers, provides a glimpse.
“(It) is the best explanation I have found on the potential strategy and underlying objectives of the new administration’s trade and tariff policy. In this analysis, the greenback’s exorbitant privilege as the global reserve currency plays a central role. A must-read for anyone trying to understand US motivations,” said Trevin Stratton, Americas Economic Advisory Leader and Partner at Deloitte.
“A User’s Guide to Restructuring the Global Trading System” by Stephen Miran can be read and downloaded here.
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