U.S. tariffs on Canada, Mexico expected to start March 1: sources
Sources tell Reuters there could be a process for Canada, Mexico to seek specific exemptions for some imports
U.S. President Donald Trump is expected to announce new tariffs against Canada and Mexico that will begin on March 1, but will include a process for the countries to seek specific exemptions for certain imports, three people familiar with the planning told Reuters.
The tariff situation remained fluid on Friday and no decision is final until Trump makes a public announcement.
The sources, who asked not to be named because they are not authorized to speak publicly on the matter, said they did not have details on a final tariff rate, but noted Trump has consistently said that he plans to impose a 25 per cent tariff on imports from the two countries on Saturday.
Separately, an administration official said Trump on Friday was reviewing tariff plans, which may allow for some exemptions. Still, any exemptions would be "few and far between," the official said.
The decision to impose tariffs stands to seriously harm both the diplomatic and economic relationships between two countries which are typically close allies, with significant implications for major industries — like energy and automotive — that have long thrived under a variety of free trade agreements. If Ottawa retaliates with its own tariffs as promised, it would amount to a trade war, which could mean higher prices and job losses nationwide.
The trading relationship between Canada and the U.S. is enormous, to put it mildly. Roughly $3.6 billion worth of goods went back and forth over the border every day in 2023, according to Ottawa, making the relationship worth a trillion dollars a year.
Out of all the goods Canada exports to other countries, more than three-quarters goes to its southern neighbour. The automotive and agriculture sectors are key, but oil and gas lead the pack: Roughly 80 per cent of Canada's oil and 60 per cent of its natural gas go to the United States.
The move also means Canadian companies will have a harder time selling to American importers, since those importers will have to pay the tariffs. Canadian exporters will need to cut prices, and sacrifice profit, to offset the tax or try to find a patchwork of new buyers to make up for losing American business.
Ontario Premier Doug Ford has warned tariffs could cost up to half a million jobs in his province, where the sprawling auto-assembly industry is closely linked to the U.S. Newfoundland and Labrador Premier Andrew Furey said Trump's move could cost thousands more jobs there, while B.C. Premier David Eby said a long-lasting trade war could cost nearly $70 billion in economic activity out west by 2028.
Trump sees tariffs — taxes one country places on another's foreign goods — as a way to protect American manufacturing and strengthen the wider economy. He has repeatedly said foreign countries pay tariffs when, in fact, they are paid by American importers.
Those companies then typically pass those costs onto their customers in the form of higher prices — which is why economists have warned it could ultimately be the public that pays the price in a tariff war.
When Trump initially threatened to impose the tariffs, he said they would be a response to what he called inaction by Canada and Mexico on illegal drugs and migrants entering the U.S., though officials have said less than one per cent of fentanyl or migrants entering the U.S. come from Canada.
Still, the Canadian government pulled together a $1.3-billion plan to boost security at the border in December to try to appease the incoming president. Prime Minister Justin Trudeau, who is in his final months of power, had promised "robust, rapid" and "very strong" retaliatory measures if Trump made good on his threats.
Trump also has said the tariffs are a way to put pressure over the United States' trade deficit with Canada, which he has incorrectly described as a subsidy. He has also said he would use economic force to turn Canada into the 51st state.
For decades, most goods have flowed tariff-free between Canada, Mexico and the United States because of free-trade agreements, the most recent of which were the Canada-U.S.-Mexico Agreement and, its predecessor, the North American Free Trade Agreement. Even when American tariffs are in place for other countries, they're often far from 25 per cent — 2.5 per cent on passenger cars or six per cent on golf shoes, for example.
On Sunday, Colombia agreed to accept flights carrying deported migrants from the U.S. after Trump threatened to hit that country with its own set of tariffs for initially turning those flights away. The showdown served as a warning about the U.S. president's willingness to punish nations that interfere with his plans.
With files from Rhianna Schmunk