Until January, polls indicated that the Conservative Party was poised to regain power from the Liberals in any Canadian election this year. However, two significant developments altered that expectation: the resignation of Prime Minister Justin Trudeau and the impact of President Trump’s trade war with Canada, which included threats to annex Canada and create economic turmoil.
Trump’s Trade War
President Trump has implemented several tariffs that affect key sectors of Canada’s economy, including a 25 percent tariff on automobiles, aluminum, and steel. A similar tariff is set to apply to Canadian exports that do not meet the criteria under the United States-Mexico-Canada Agreement. An additional auto parts tariff of 25 percent is scheduled to take effect soon. Recently, Trump suggested the possibility of increasing automobile tariffs, although he did not provide specific details.
Automobiles and auto parts represent Canada’s largest exports to the United States, excluding oil and gas.
Canada Hits Back
In response, Canada has imposed retaliatory tariffs on U.S. goods, projected to generate approximately 30 billion Canadian dollars (about $22 billion) in revenue annually. Following his appointment as prime minister in March, Mark Carney introduced an additional 8 billion Canadian dollars (around $5.7 billion) in tariffs, including a 25 percent levy on U.S.-made automobiles, while allowing duty-free imports of American-made cars for automakers with assembly lines in Canada.
The Canadian public has reacted by reducing travel to the United States, and government-owned liquor stores in several provinces have removed American alcoholic beverages from their shelves. Calls for boycotts of American products have increased, prompting Canadian manufacturers to enhance their branding with national symbols.
How to Handle Trump
Both Mark Carney and Conservative leader Pierre Poilievre have adopted a firm stance regarding President Trump. In a conversation with Trump, Carney indicated that negotiations on economic and security matters would commence with the next prime minister, emphasizing the need for a strong starting position to assert Canada’s economic autonomy.
Throughout the campaign, Carney has highlighted his financial expertise as an asset in addressing the challenges posed by Trump’s tariffs. Poilievre, on the other hand, has focused on rectifying issues he attributes to the Liberal government, advocating for tax cuts and resource project approvals to strengthen Canada’s position against Trump.
The Crisis Will Probably Get Worse
Trump’s auto tariffs have already led to immediate repercussions, including a two-week shutdown of a factory in Windsor, Ontario, and layoffs among auto parts manufacturers. The potential tariff on auto parts could have severe implications, particularly for smaller, family-owned businesses that lack the financial resilience of larger corporations.
Economic Ideas, but Few Details
Both leaders have discussed the construction of oil and gas pipelines to facilitate fuel exports to Europe but have not provided specifics regarding interested companies or financing methods. Poilievre has also proposed expediting environmental reviews and consultations with Indigenous groups, which has drawn criticism from environmental advocates and Indigenous leaders.
For the auto sector, Carney has suggested creating a system where vehicles are assembled in Canada using domestically sourced parts. However, he has not outlined how he would incentivize automakers to adopt this model. Additionally, Carney has pledged to allocate 2 billion Canadian dollars to support the auto industry in adapting to U.S. tariffs, though the specifics of this assistance remain unclear.