What you'll learn:
- What the latest round of U.S. tariffs entails (as of Feb. 3, 2025)
- How Canada has responded with its own tariffs
- The impact on U.S. and Canadian trucking sectors
On Feb. 1, President Donald Trump fired the first salvo in what could become a long and expensive trade war with Canada, America's largest trading partner and long-standing ally. The president slapped tariffs of 25% on virtually all imported Canadian goods and services except Canadian energy exports, which will be subject to a 10% tariff.
The unprecedented move also levies tariffs of 25% on all goods from Mexico, and 10% on Chinese goods. Trump’s actions, spelled out via three executive orders (not yet published in the Federal Register), left no room for exclusions, or goods that would be exempt from the tariffs.
On Feb. 3, Mexican President Claudia Sheinbaum posted on X that due to Mexico bringing more troops to the border, Trump has agreed to pause tariffs for one month.
Warnings about the possibility of tariffs started coming from the White House just days after Trump was elected. As president-elect, Trump said repeatedly that if Canada successfully dealt with its leaky border, the tariffs would be shelved. Canada was also warned retaliatory tariffs would result in an increase of the tariff rates.
But retaliate they did. And on the evening Trump announced the tariffs, Canadian Prime Minister Justin Trudeau, who on Jan. 6 announced his resignation pending a new P.M. being named, said his government would slap 25% tariffs on $30 billion worth of American goods coming into Canada, beginning on February 4th.
"We didn't ask for this, but we will not back down in standing up, both for Canadians and for the incredible, successful relationship and partnership between Canada and the United States," Trudeau said in response to a question about the tariffs.
Items targeted in the first round of Canadian countermeasures include American beer, wine and bourbon, fruits and fruit juices, along with vegetables, perfume, clothing, and shoes. The list also includes major consumer products like household appliances, furniture, and sports equipment and materials like lumber and plastics, and much more.
Trudeau said Canada would apply tariffs to an additional $125 billion worth of American imports within 21 days. This interval allows for a public comment period prior to implementation. It will include products such as passenger vehicles, trucks and buses, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy products, and more.
“Canada and the U.S. are more than just trading partners. We are highly integrated economies—and this has greatly benefitted both of our countries, for more than 150 years," said Hon. Dominic LeBlanc, Canada's Minister of Finance and Intergovernmental Affairs. "We want to preserve this relationship, but in the face of the unjustified U.S. tariffs against Canadian goods, we are taking action to protect our economy, our workers, and our businesses. We will always stand for Canada.”
How Canadian tariffs could impact U.S. commercial vehicle sector
There are a few OEMs that assemble trucks in Canda and export to the U.S. Hino operates the Woodstock Assembly Plant in Ontario, while Paccar manufactures Kenworth and Peterbilt trucks in Quebec at its Ste-Thérèse plant. According to the company, "Paccar also exports a vast majority of its trucks manufactured in Ste-Thérèse to the United States."
Last summer, Ford also announced plans to invest $2.3 billion in its Oakville, Ontario plant to manufacture Super Duty trucks, with an estimated capacity of 100,000 trucks annually. Ford noted the Super Duty plants in Kentucky and Ohio are operating at maximum capacity.
On the telematics side, Isaac Instruments manufactures ELDs and other components outside of Montreal.
Mexico has a much larger impact, with Saltillo and Monteray being hot beds for truck and parts manufacturing. If Mexico continues to play ball with Trump, it's likely tariffs on Mexican goods would not go into effect.
On Feb. 1, U.S. trucking lobby group American Trucking Associations provided this response to the tariffs:
“As the trucking industry recovers from a years-long freight recession marked by low freight volumes, depressed rates, and rising operational costs, we have concern that tariffs could decrease freight volumes and increase costs for motor carriers at a time when the industry is just beginning to recover,” said Chris Spear, ATA president and CEO . “A 25% tariff levied on Mexico could see the price of a new tractor increase by as much as $35,000. That is cost-prohibitive for many small carriers, and for larger fleets, it would add tens of millions of dollars in annual operating costs.
“Trucks move 85% of goods that cross our southern border and 67% of goods that cross our northern border, supporting hundreds of thousands of trucking jobs in the U.S. We firmly support policies that will secure our borders and protect legitimate trade, but we also recognize the unintended consequences that substantial tariffs could have over the long term, including higher consumer costs on the wide range of goods that cross our borders by truck, including food, automobiles, televisions, computers, furniture, and other key manufacturing inputs.”
Canada's trucking sector at risk
Canada is the top customer for U.S. goods and services exports and a critical supplier of goods and services integral to the U.S. economy. Canada buys more U.S. goods than China, Japan, France, and the United Kingdom combined.
Canada is the largest export market for 36 states and is among the top three for 46 states, with 43 states exporting over $1 billion to Canada every year.
Every day over $2.5 billion worth of goods and services crosses the border, and Canadian trucks haul more than 65% of that freight, by value.
The Canadian trucking industry is already in difficult straits due to a prolonged freight recession and from unscrupulous competition operating unabated in the underground economy. Canadian Trucking Alliance, a federation of provincial trucking associations representing more than 4,500 carriers and industry suppliers, is imploring the federal government in Ottawa, the premiers of the individual provinces and territories, and officials in Washington to immediately come to the table and end this unwarranted trade conflict.
“This has gotten out of hand,” CTA president Stephen Laskowski said. “The reality is the tariffs are unreasonable, are out of proportion to the problem. The tariffs are like taking a sledgehammer to crack a nut.
“The Americans clearly believe we are not doing enough to address their concerns," Laskowski said in a statement. "We therefore need Ottawa and Washington to come together to find common solutions to this specific challenge rather than bringing economic chaos to both countries.”
In December, the Government of Canada announced Canada’s Border Plan, which aims to bolster border security and strengthen its immigration system. The plan is backed by an investment of $1.3 billion and built around five pillars:
1) Detecting and disrupting fentanyl trade;
2) Introducing significant new tools for law enforcement;
3) Enhancing operational coordination;
4) Increasing information sharing;
5) Minimizing unnecessary border volumes.
Like the CTA, the Private Motor Truck Council of Canada, representing Canada's private carriers, says unjustified tariffs imposed on Canada by President Trump will have severe consequences for both the Canadian and American economies.
"President Trump's tariffs will hurt the populations of both countries, sending consumer prices upwards," said Mike Millian, president of the Private Motor Truck Council of Canada. "This move will cost Canadian jobs and slow down cross border trade, affecting nearly 120,000 Canadian drivers and their companies who cross the U.S. border regularly."
Millian says although it will hurt, we agree with the Canadian response with counter tariffs.
"We cannot sit by and not respond when the U.S. administration chooses to ignore a bargained free trade agreement, risking damage to both our economies."
What's Behind the Tariffs?
The motivation for this trade war has many analysts puzzled—Canadian and American alike. President Trump has been clear from the start that he wants governments in Mexico and Canada to do more to stem the flow of illegal aliens and narcotics, particularly fentanyl, into this country.
But is that the real crux of the issue?
Canada claims its contribution to America's fentanyl crisis is minuscule compared to the flow of synthetic opioids across the southern border. U.S. Customs and Border Protection agents last year intercepted more than 21,000 lbs. of fentanyl at the U.S. southern border, while agents seized just over 40 lbs. of the synthetic opioid at the Canadian border.
Doug Ford, the premier of Ontario, questioned Trump’s stated reason for imposing the massive tariff on Canada in a CNN interview with Jessica Dean, just hours before Trump brought the hammer down.
"It's really disturbing when President Trump is using fentanyl as a reason, lumping us in with Mexico, when the figures from U.S. Customs is very clear," he said, citing the fraction of Fentanyl that enter the U.S. via Canada compared to Mexico, and noting the more than 55,000 lbs. of narcotics—heroin, cocaine, opioids, and more, and illegal firearms—coming into Canada from the U.S.
“Frankly, it was illegal breaking a deal that we had with the USMCA [free trade agreement],” Ford added “And it’s disappointing.”
Canada doesn't look quite as good when it comes to the number of illegal immigrants entering the U.S. at unauthorized points.
Canada's public broadcaster, CBC, reported Customs and Border Protection officers intercepted 19,498 migrants between border posts on the northern border between October 2023 and July 2024.
Numbers from the U.S. Border Patrol at the U.S.-Mexico border are much higher but dropping. The number of illegal migrants intercepted by Border Patrol officers reached a high of 249,743 in December 2023, though that dropped 77% to 58,038 in August 2024, though that could be seen as a last ditch attempt by the Democrats to appear tough on border issues ahead of the 2024 election.
It's worth noting that Trump chose to use the International Emergency Economic Powers Act (IEEPA) to impose his tariffs rather than a trade agreement. The current USCMA prohibits the use of economic sanctions or tariffs to resolve trade disputes.
Some analysts have suggested Trump sees trade war as a means of enriching the U.S. treasury. Others have said the tariffs are a precursor, a first phase in a full-scale trade war. Canada is seen as a high-value target because of its vast mineral resources and technologically advanced society.
Still others think President Trump is just trying to soften up Canada ahead of an attempt to annex the country, making it the 51st state—something that will not sit well with Canadians.
President Trump reiterated that suggestion Sunday morning in a TRUTH Social post: "We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use. Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true!"
"Therefore, Canada should become our Cherished 51st State," Trump added. "Much lower taxes, and far better military protection for the people of Canada – AND NO TARIFFS!"
President Trump has said the "Tariffs will remain in effect until such time as drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
However, the U.S. Chamber of Commerce came out against the tariffs on Sunday.
"The President is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains," said Chamber of Commerce senior vice president and head of international, John Murphy.
Canadian provinces respond aggressively
Despite the threat of additional economic penalties President Trump said he would impose if Canada retaliated to his tariffs, Canada's federal government and individual provinces and territories are responding vigorously.
The most prevalent target so far is liquor, particularly brands such as Jim Beam, Jack Daniels, and other popular bourbons produced in red states such as Kentucky. Several provinces, Ontario, British Columbia, and Saskatchewan, among others, will have pulled those brands from the shelves by the time the tariffs come into force Tuesday morning.
The list of goods targeted by Canadian retaliatory tariffs include most consumer goods, which will drive up prices for American consumers of those products. Canadian softwood lumber is also on the list. A favorite of American home builders, if lumber prices spike, so too will the cost of a new home.
Before President Trump imposed his tariffs, the Canadian government said U.S. gas prices could jump some 75 cents a gallon if he went ahead with tariffs. Because gasoline prices are a sensitive matter with voters, Trump has limited the tariffs on energy products such as Canadian crude oil to 10% rather than 25%. He clearly doesn't want a consumer backlash to his tariff plan, but that could well happen, even at 10%.
The cost of keeping the lights on in many American homes could also increase when Canadian countervailing tariffs are applied to electricity imported from energy-rich provinces like British Columbia, Ontario, and Quebec.
Experts have said trade action of this magnitude has the potential to shave billions of dollars off of Canada's gross domestic product (GDP) and plunge the country into a painful recession requiring government stimulus to prop up the economy. Canada has said it's prepared to fight back dollar-for-dollar.
The Budget Lab at Yale has released estimates showing Canada's retaliatory tariffs could cost the average American household up to $1,170 annually.
In remarks outlining Canada's response to U.S. tariffs, Trudeau took the time to remind Americans of the long-standing friendly and supportive relationship the two nations share.
"I want to speak directly to Americans, our closest friends and neighbors. [Canada's decision to apply countervailing tariffs] is a choice that will harm Canadians, but it will also have real consequences for you, the American People," he said. "Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities. They will also raise costs, including food at the grocery store and gas at the pump."
Later, he reminded Americans of the legacy of support and kinship Canadians have offered Americans over the years, citing specifically aid and assistance offered to fight the recent wildfires in southern California as well as Hurricane Katrina, and September 11, 2001, when Canada provided refuge to stranded passengers and planes.
"We have fought and died alongside you from the beaches of Normandy to the mountains of the Korean Peninsula, from the fields of Flanders to the streets of Kandahar, Canadians were there with you during your darkest hours," he said.
