News Analysis
U.S. President Donald Trump signed a new presidential action on tariffs, this time directing his officials to study how to reciprocate tariffs other countries have put on the United States.
With its free trade deal with its southern neighbour, Canada could be in a better position than most on tariffs. The Trump administration, however, could go after other measures impacting trade, such as regulations, taxes, and subsidies, something Canada has plenty of.
“I have decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them no more, no less,” Trump said from the White House on Feb. 13 when announcing the measure.
The U.S. president added that in “almost all cases” other countries are “charging us vastly more,” but “those days are over.”
As opposed to the 25 percent blanket tariff approach adopted on steel and aluminum earlier this week, this exercise will require a line-by-line study of trade measures each country has in place.
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The U.S. administration said it aims for the plan to come into effect in April.
The White House has singled out Canada’s Digital Services Tax (DST), which came into force in summer 2024. This tax requires large foreign and Canadian businesses to pay tax on revenue earned through engaging with online users in Canada.
Concerns around this issue were also present during the Biden administration, with the U.S. trade representative identifying the measure as a trade barrier, noting that such taxes “discriminate against U.S. companies.”
The Trump White House said “only America should be allowed to tax American firms,” adding these types of non-reciprocal taxes cost U.S. businesses over US$2 billion a year.
Regarding tariffs Canada imposes on the United States, they are limited because of the USMCA free trade agreement.
A large quantity of the items still covered by tariffs in the trade deal are related to products in Canada’s supply management system, such as dairy, eggs, and poultry.
For example, the tariff schedule for Canada under the USMCA mentions a 1.90 cents/kg tariff on turkeys coming from the United States.
The U.S. tariff schedule includes surtaxes on Canadian products such as maple syrup. The product is taxed at 16.9 cents/kg plus 5.1 percent.
Both counties impose tariffs on a type of whey, albeit using different metrics. Canada imposes an 11 percent surtax on whey, whereas the U.S. tariff is 87.6 cents/kg.
Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, said at first glance the reciprocal tariffs that could be imposed around supply managed goods likely won’t have a major impact on Canada.
The food sector under supply management is not a major exporter to the United States, he said in an interview with The Epoch Times.
Charlebois noted that if the United States reciprocates the high tariff that Canada applies on eggs, for example, it will end up backfiring as the country deals with an eggs shortage.
He also said there won’t be a “moral case” for Canada to respond to this U.S. trade action, given Trump is only reciprocating. “We can’t really blame the Americans since we’re also quite protectionist,” he said.
The Canadian government is currently trying to avert an array of U.S. tariffs, all of which were proposed by Trump citing border security concerns.
Trump has put a pause on the 25 percent tariffs on all goods and 10 percent tariff on energy while his administration reviews Canada and Mexico’s actions to stem illegal immigration and fentanyl trafficking. The pause expires on March 4.
The universal 25 percent tariffs on steel and aluminum are set to come into force on March 12. Trump said the undercutting of the U.S. market, leading to the erosion of the industrial base, is a national security issue. A large quantity of U.S. imports of steel and aluminum come from Canada.
To avoid the various tariffs, Finance Minister Dominic LeBlanc was in Washington, D.C., this week, where he met with senior Trump officials.
“What the Americans have said to us privately, and what they’ve said publicly, is that we have a number of weeks to work together,” LeBlanc told reporters on Feb. 12. “And President Trump’s words were very precise; to structure an economic deal with Canada.”
