While Canada has been grappling with a continuous wave of U.S. tariff shocks over the last two years, U.S. President Donald Trump’s latest levies are different.
It is the first time the U.S. is slapping tariffs on personal care items and goods that have until now been untouched by the trade war, according to Canadian Manufacturers & Exporters.
“We’re in for a rocky road,” the association’s president and CEO, Dennis Darby, told BNN Bloomberg.
On Monday, Trump signed an order to impose 50 per cent tariffs on Canadian goods, which the White House states is in “response to Canada’s discriminatory treatment of American products.”
The list includes chemicals, plastics, paper and beverages, right down to personal care products and cosmetics, warns Darby. It even includes wine, hockey sticks, and cement.
Darby says Trump’s latest proposed tariffs hit about US$20 billion which is $28 billion worth of products that have been tariff-free, creating new concern for businesses.
They are expected to take effect on Aug. 19 and will apply even to goods that comply with the Canada-United States-Mexico Agreement (CUSMA).
“We’re hearing from companies who we haven’t really heard from much in the last year and a half because they had been mostly exempt,” says Darby, adding that businesses have already been delaying investments because of prolonged uncertainty surrounding CUSMA.
“It adds to the complexity, and complexity of business planning for sure.”
Darby says businesses are now less likely to invest in production, buy new equipment or build new factories because of the uncertainty over where trade with the U.S. is headed.
“In fact, 73 per cent of our members across Canada say failure to get a renewal of CUSMAwill lower their confidence and future expectations for the company,” says Darby.
U.S. ignoring CUSMA to apply tariffs
Darby says this is the first time the U.S. is ignoring CUSMA to put tariffs on a broad range of items that used to be tariff-free. It’s not the first time the U.S. has ignored the deal entirely, though.
He says the Section 232 tariffs applied to steel and auto products last year also broke the rules.
“The Canadian government was very clear that those were in contravention of CUSMA, but the U.S. went ahead anyway,” says Darby.
“And in the same token, these ones (are) under Section 338 which is a Depression era power given to the president.”
The White House describes Section 338 as part of the Tariff Act of 1930 which allows the U.S. president to impose tariffs of up to 50 per cent on imports from countries found to discriminate against American commerce,
Pushing for CUSMA
Darby says his association is pushing the government for a renewal of CUSMA and the removal of tariffs.
While Canada and Mexico both supported extending the agreement for another 16 years, the lack of a unanimous decision means the treaty was formally not renewed.
The agreement has not expired and remains fully in force under its original terms until 2036.
Canada and the U.S. have agreed to intensify trade talks in the coming weeks after a direct call between Prime Minister Mark Carney and Trump. Canada has a 30-day window to negotiate and convince the Trump administration to lift the duties before they take effect.
U.S. Trade Representative Jamieson Greer stated he hopes to present options to Trump, Canada, and Mexico by the end of the year regarding the renewal of the continental trade agreement after stating earlier this month that the U.S. would not renew the trade pact in its current form.
“We are still fairly tied at the hip to the U.S. Geography matters and history matters in manufactured goods,” says Darby.
