What Are Trump’s Trade Tariffs?
At 12:01 a.m. on Tuesday, March 4, President Trump kept to his word, enacting sweeping trade tariffs on all goods coming into the U.S. from Canada and Mexico. He has slapped an additional 10% tariff on Chinese imports. The 25% tariff affects nearly all Canadian and Mexican imports. Canadian energy products, including crude, are being taxed at a lower 10% rate.
Back in 2018 when President Trump enacted tariffs on steel and aluminum imports into the U.S., he tweeted that “trade wars are good, and easy to win.” But it’s not quite that easy.
Economists have warned that the added costs on thousands of goods coming into the U.S. from Canada and other countries will result in Americans paying more for everyday consumer goods such as automobiles, groceries, alcohol, gas, lumber, and cars.
It is estimated that the 25% tariffs could result in a tax increase of up to $225 billion with after-tax income falling US$930 per person on average.
Here in Canada, the fallout from a trade war could be severe. Every year Canada sends roughly 80% of its exports to the U.S., accounting for nearly 20% of the country’s gross domestic product (GDP).
A prolonged trade war could result in Canada’s GDP taking a big hit and lead to a rise in unemployment, impacting over 510,000 jobs.
Prime Minister Trudeau has said Canada would retaliate, imposing an immediate $30 billion in tariffs on U.S. goods, with that number rising to $155 billion in 21 days.
Ontario Premier Doug Ford told a U.S. network that he could retaliate by shutting off the province’s electricity exports to the U.S. and blocking shipments of nickel. Ontario is responsible for 50% of U.S. nickel supplies; blocking that supply would “shut down manufacturing” in the U.S. As a result, auto plants in Michigan “would grind to a halt within a week.”
Premier Ford also suggested that potash from Saskatchewan, which is essential for fertilizing fields, and uranium, could be part of retaliatory efforts.
How Are Global Stocks Reacting To The Trade War?
A trade war is neither good nor easy to win. If anything, it is a blow to every economy involved. In fact, the day President Trump announced his tariffs, concerns of a global trade war ramped up, sending global stocks reeling.
In the U.S., the S&P 500 lost 1.5% of its value, erasing all of its gains since the November 2024 U.S. election. In the days leading up to the tariff deadline, the Dow Jones Industrial Average fell 3.5% and the Nasdaq dropped more than 5%.
The Toronto Stock Exchange, meanwhile, is deep in the red; down almost 2% on the day. Markets in Europe took a big dive, while in Asia, stock declines were a little more modest.
Should the 25% tariffs on Canada and Mexico and 10% tariffs on China last through 2026, earnings for the S&P 500 could collectively fall by 5% to 7%. In Canada, lower exports are expected to weigh on corporate profitability and lead to a recession.
That said, there are many who believe President Trump is using the tariffs as a negotiating tactic. Canada, Mexico, and the U.S. (USMCA) will be meeting to renegotiate their official free trade agreement (the one that replaced NAFTA) in 2026 but they could meet earlier.
President Trump said earlier this year that he wants to reopen negotiations on the USMCA trade agreement early. Investors should take the trade war with the U.S. seriously, but again, it could be a costly negotiating tactic.
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