Canada Retaliates With Tariffs, Trump Threatens Bombardier

Canada’s retaliatory tariffs took effect early Tuesday, September 8, at 12:01 a.m. Eastern time, pushing the trade conflict between North America’s two largest economies into a phase measured in tens of billions of dollars. For Belgrade this is not a distant episode: when the world’s largest power uses tariffs this openly as leverage against a neighbor and longtime ally, it amounts to a demonstration for every smaller, open economy that builds its foreign trade on predictable rules, Serbia included, on its path toward European integration.

Canada’s rates range from 15 to 50 percent and, according to figures released the same day the tariffs took effect, hit about 27.6 billion dollars of American goods, nearly 28 billion. The tariff on US steel and aluminum was doubled to 50 percent, matching the rate Washington already charges on Canadian metal. The retaliatory measures cover:

• paper and pulp
• construction materials
• home appliances
• electronics
• agricultural products
• agricultural machinery

Canada’s move answers US tariffs of 50 percent on 20 billion dollars of Canadian goods, which Donald Trump imposed on August 22. Washington based those duties on Section 338 of the Tariff Act of 1930, a provision never before used to impose tariffs, which lets the president levy duties of up to 50 percent without any prior investigation, for an unlimited period. The same 1930 law, known for the Smoot-Hawley tariffs that engulfed the entire world at the time, has been cited by economists for decades as one of the causes that deepened the Great Depression. The American tariffs cover about 5 percent of Canada’s annual exports to the United States. The Supreme Court ruled in February that Trump had exceeded his authority with an earlier round of tariffs imposed under a different legal basis, and ordered refunds to importers, prompting the administration to start searching for a new legal footing for its duties, including this one against Canada.

The day before Canada’s measures took effect, Trump threatened that Montreal-based aircraft maker Bombardier would be barred from selling in the US market unless it moved production to the United States. In a post on his Truth Social platform, he wrote: “If they want our market, they have to build here, and stop treating America like a piggy bank.” Bombardier responded that it already has significant production facilities in the United States and is continuously expanding its presence there, adding that the company is creating tens of thousands of jobs on American soil.

The escalation came after talks between the two countries collapsed last month, at the last moment and after days when the sides appeared to be nearing a deal. The sticking points were exemptions for trucks and vehicles, limits on Canada’s right to sign trade agreements with third countries, and French-language content requirements on streaming platforms. Canadian Prime Minister Mark Carney summed up the collapse bluntly: “They asked for too much, and offered too little.” Speaking from Ottawa, he said Canada had been willing to drop its remaining retaliatory tariffs on steel, aluminum and cars if Washington significantly lowered its own, and to encourage the provinces to bring back sales of American alcohol, but that the American demands ultimately went too far. Trump’s chief trade negotiator, Jamieson Greer, countered that the offer on the table had included lower tariffs on steel, cars and lumber, and was more favorable than what Canada is getting now.

The political weight of the breakdown is likely bigger than its immediate economic impact. The two countries traded 880 billion dollars in goods and services last year, and 72 percent of Canada’s goods exports go to the United States. Canadian public opinion is visibly angry: a petition calling for the expulsion of US Ambassador Pete Hoekstra, seen as close to Trump, has gathered almost 248,000 signatures since July 21, accusing him of normalizing the president’s remarks about a possible annexation of Canada by the United States. Ontario Premier Doug Ford, whose province carries the largest share of Canadian industry, has publicly backed Carney’s response, saying Canada should hit back “tariff for tariff, dollar for dollar.”

The fate of the renewal of the trade agreement linking the United States, Canada and Mexico, known as the USMCA, is now less certain than it was a week ago. Washington has already opened formal talks with Mexico on revising the deal, while talks with Canada have not even started, and the escalating tariff dispute raises the question of whether they will begin at all at this stage. Analysts warn that the full effect of the new duties on store shelves and prices will not be felt right away, since shipments of goods are mostly contracted in advance: a more noticeable rise in prices is expected only by next summer, once current orders finally stop absorbing the new cost.