The Current - Trump’s tariffs are here. What happens now?

Episode Date: March 4, 2025

The trade war between Canada and the United States has begun, with President Donald Trump slapping 25 per cent tariffs on most Canadian goods. We look at what happens now, and how Canadian businesses and politicians are already responding.

What does a mummified Egyptian child, the Parthenon marbles of Greece and an Irish giant all have in common? They are all stuff the British stole. Maybe. Join me, Mark Fennell, as I travel around the globe uncovering the shocking stories of how some, let's call them ill-gotten, artifacts made it to faraway institutions. Spoiler, it was probably the British. Don't miss a brand new season of Stuff the British Style. Watch it free on CBC Gem. This is a CBC Podcast. Hello, I'm Matt Galloway, and this is The Current Podcast. After a month long pause, President Donald Trump's 25% tariffs on all Canadian imports are here. The CBC's senior business reporter, Peter Armstrong, is in Washington, D.C. this morning.

Peter, good morning. Good morning, Matt. What happens now? Well, look, prices are going up. Prices are going up on both sides of the border. Tariff is just a fancy word for a tax. The American Tax Foundation has said the imposition of these tariffs is like slapping a 130 billion dollar tax on the average American family. The average American family incomes are going to drop. The same thing

is going to happen maybe to a lesser degree out of the gates because we're imposing a smaller number of tariffs on a smaller number of goods in Canada, but prices will go up. Your spending power will be weakened. As that sort of works its way into the economy, you'll see demand begin to drop. You'll see all kinds of havoc wreaked on supply chains and on shift work and on the amount of stuff we make is going to start to change. And it'll all happen quicker

than I think a lot of people have expected. Do we have any reason or any understanding as to why this is happening now? I mean, any clear understanding? Well, no. And I think that's one of the most important parts of this conversation. Ostensibly, at least, Matt, the reason we have been told that this had to happen and couldn't possibly be undone is because Donald Trump feels that drugs and people are flooding across the border into the United States and that Canada and Mexico simply had to take action. They didn't do enough and therefore he had to impose tariffs. And yet, if that was the case, you would think

you could get them on the phone and say, well, what do we need to do? And yesterday he said, no, no, there's no room for negotiations. We have to just go ahead and do this. And at the same time, in the same breath said, so the only way for Canada, Mexico to get out of this is to move their auto plants back into the United States or into the United States. So he is contradictory at its very essence

of why this is happening. And I was literally just watching Bloomberg that are trying to answer that exact same question from a market's perspective. And they have all these chief economists on saying, they don't know either. Is it that he likes tariffs? Is it that he thinks he can raise a bunch of money

through tariffs to pay for his tax cuts? Is it that he actually wants to affect some kind of change at the border? Is it that he actually wants to affect some kind of change at the border? Is it that he wants to move up the negotiation date for CUSMA or USMCA or the renegotiated NAFTA? Maybe it's a little bit of all of those, but the sad fact is we simply don't know

a firm clear answer about any. And so in the face of that, the Canadian government has responded. What do we know about how the government here, we're gonna hear more from the prime minister, but what do we know about how the government is responding? So the government, I mean, lest we forget, we have a bit of a playbook because we went down this road

in 2018 with the steel and aluminum tariffs. And back then we had this tiered response where we initially had tariffs on a bunch of goods coming into the United States with the threat that that would grow over time. And it did grow over time. But the same thing we're doing this time. We're saying there is going to be a 25% tariff on one sort of slash of goods starting today and that that will grow to give supply chains and Canadian businesses a chance to sort of plan accordingly that will grow over time and there instead of slapping like the American tariff is on every basically every good going into the United States a slightly lesser tariff of 10% on Canadian oil. The Canadian response to that is to pick products that come out of politically important regions right right? And your audience knows this very well.

It's orange juice from Florida because that's his base of power. It's motorcycles from Kentucky because that's where he gets a lot of his political support in Washington is from politicians in Kentucky. It's appliances from Wisconsin. It's yogurt from Wisconsin where he saw a lot of his base political support of voters. And so the government of Canada is trying to find a way to leverage what political power around Trump is vulnerable to. And that's where they're going after really specific targets of tariffs that will impact on the ground, make people feel the pinch in those regions that will

put pressure on those local politicians who in turn, ostensibly at least, will put pressure on Donald Trump. The problem that did sort of work last time around, the problem this time everybody says is Donald Trump isn't running for reelection. He doesn't have to worry about that political pressure in the same way. I mean, it's interesting because there was a multi-pronged response. You have the federal government, but you also have the provinces and territories that have promised their own responses here.

Have a listen to the premier of Ontario, Doug Ford, just recently won a third majority government in an election campaign, fought in many ways around him being kind of captain Canada and how he was going to respond to these terrorists. Have a listen to what Doug Ford said yesterday. If they wanna try to annihilate Ontario,

I will do everything, including cut off their energy with a smile on my face. So, and I'm encouraging every other province to do the same, Quebec, Manitoba, BC, we all have to act in unison out east. They rely on our energy. They need to feel the pain. Premier of Nova Scotia Tim Houston put out a

statement this morning on social media saying Donald Trump is a short-sighted man who wields his power for the sake of it. Says that Nova Scotia will limit access to provincial procurement for American businesses. Double the cost of tolls for the Cobra Quid pass will take American booze off the shelves

of the Nova Scotia Liquor Corporation. How do we think provincial leaders are going to respond? Yeah, I think it's going to be a really interesting day as we get, because we will move from, you know, Doug Ford saying he'll cut off energy supplies with a smile on his

face to will he actually do that? It will be a really interesting test. Uh, the, you know, all of the provinces have said they're going to take American booze off the shelves of stores. A lot of them, I mean the government of BC put out a whole information page on this, but at the very top of it is a real push for consumers in that province to buy Canadian. And I think that is in a lot of ways the most common response we're going to see everyone's going to try to figure out what their lever they can pull is going to be and what sort

of leverage they can get out of that but I think that notion of trying to tap into a real ferocious response from Canadian consumers and Canadian households Canadians are really upset about this as you well know tapping into that and getting people to pay a little bit more attention to where their products come from is I think going to be an enormously important part of this response. Peter, we'll talk more about this as this unfolds. In the meantime, thank you for this. You bet. Peter Armstrong is the CBC's senior business correspondent. He was in Washington, D.C. Frances Donald is the chief economist for RBC. Frances, good morning to you.

Good morning. How bad is this going to be for the Canadian economy? Well, forgive the economist's response, but it depends. How long do these tariffs stay in place? What does the Canadian dollar do? We have to see what the Bank of Canada chooses to do in response and what kind of government packages do we get. Now, the Canadian dollar didn't respond at all and so far it looks about flat. We didn't get Bank of Canada cuts and the federal government didn't respond. Well, it's recessionary for Canada after about three months of the tariffs in play, but there's a lot of offsets that can come through. And so while this is a very difficult

situation, I don't want to sugar coat the impact on the economy, there are a lot of things that can be done and could make this less severe. Tiff Macklin, the governor of the Bank of Canada said that protracted trade conflict would see severe economic consequences in this country. We were in Windsor just last month and we heard from people there at the centre of Canada's auto

sector saying that if these tariffs come into place, their worry was that the production lines could stop rolling within a week or so. How quickly, I mean, again, given all of the contingencies that you've mentioned, how quickly do you think we will start to see the impacts of this? We're already seeing the impacts of even the threat of tariffs over the course of January

and February coming through the economy. And while Canada's data tends to be lagged and we have a lot less of it, even the United States has started to show signs of the weight and the damage of tariffs even before they came to play. So for example, we saw significant amount of front loading or stockpiling from Americans over the course of January and February. They imported a lot of Canadian goods just in an attempt to sort of front run some of these tariff increases.

We've seen survey indicators drop very fast. We have uncertainty that's risen across all measures to near or all time highs. We know already that just the threat of this weighed on sentiment for Canadian households and businesses over the course of February. And now that they're a reality, what we're grasping with on our teams today is not the GDP calculation of reducing manufacturing activity. It's what is the pain of that sentiment change? And I think what's problematic to calculate is, you know, I wonder, can we put the toothpaste back in the tube, even if tariffs last a month or two months?

How does this shift the fabric of the Canadian economy? What kind of changes will businesses and households want to make, regardless of the length of the duration? That's really hard to calculate, but we know it's in play. It wasn't just in play starting this morning. It's been in play for several months. Well, and the key thing is for a lot of Canadians, I mean, the economy can be something large, this macro idea, but people's experience of the economy is, can they pay rent? How much does it

cost to put groceries in the cart to feed their family, to keep the lights on, to be able to put gas in the tank or get around in the city? What should people be thinking about when it comes to their personal finances? Well, I've long said that everybody is an economist. We're all everyday economists because we interact with our economy and our own economy in many, many ways. So I think Canadians will feel themselves becoming economists more and more as they see the prices of some things they buy, some items, like for example, uh, orange juice or maybe alcohol from the United States, they'll see those prices rise and they'll naturally want to buy more Canadian as a result of that.

They'll see the Canadian dollar probably weaken and say, well, as much as I may not want to go to the United States for patriotic reasons, it's just become more expensive for me to do that. But underlying at all, I've already heard in my life outside of the spreadsheets and the models that folks are saying, well, maybe right now we'll just wait to see what the economy looks like, maybe not go make that large house purchase. That doesn't require an economist to tell you that that's the right direction to go to.

So Canadians have the right and are absolutely capable of understanding how these higher prices impact their own lives. They don't need an economist to explain to them the impact that what comes ahead of. There are impacts from those decisions though too. One of the concerns obviously that people have are potential job losses. And that can come from manufacturing sectors

slowing down, but it can also come from, to your point, people pulling back a little bit and saving more money, right? No, you know, we are still in Canada, um, generally dealing with a shortage of labor. So coming out of COVID, we did see mass retirements. We've slowed down on immigration and there's some scarring from companies because when you let folks go, it's actually getting harder, just structurally over the course of the past five years to bring them back on board.

So I think that companies are going to try a little bit here to hold on until they see just what is the duration of these tariffs. And that's what's so problematic about this shock for Canada, whether you're a small business owner, you're running a large corporation is that it's possible it's possible that next week the tariffs come off. You don't want to make permanent business decisions at this juncture when you're missing that information, when you're missing how the bank of Canada will respond on March 12th or what the government packages will look like. It is however, more reasonable to expect

businesses to pause on things like hiring and large-scale investments. It's also reasonable that global international businesses that were maybe thinking about Canadian products or Canadian business investment may want to pause on that until they get a lay of the land. So it worries me less that we would see large-scale layoffs in the next couple of months and more that we see a freeze in activity, but that in and of itself is a little bit problematic too. You've mentioned just a couple of times before I let you go, you talked about whatever government could do in the face of this. What can, and we're hearing from premiers already, what can Canadian

leaders do to mitigate the impact of these tariffs? Well, I tend to think about this shock is you have an economic immune system in Canada and we know that our immune system was very weak. Growth was slowing. We don't have great productivity. We don't have diversity of industry. And then of course, if you have a weak immune system and you get hit with a virus, in this case a tariff shock, then you're not in a great place and you get more sick from it. So policymakers are going to have to attack the virus or how do we offset the tariffs? And then meanwhile, they're also going to have to think about how do we improve the immune system. So broadly speaking for Canada, we're hearing a lot about the resource economy, inter-provincial trade barriers, what we can do to diversify trade globally. And those are all good things. But in the near term, premiers and the federal government

are going to have to think about how do they support those who may lose their job in the next six to 12 months? And how do they directly inject cash into areas of the economy that are being directly impacted by tariffs? And most economists will say, really try to be targeted in your responses. Because if we send out, for example, $2,000 checks to all Canadians across the country and the next day tariffs are removed You could end up back in that inflationary spiral So targeted responses is what you're gonna hear a lot of economists lobby governments for it does really feel like we're on

I'm not a roller coaster fan. It feels like we're on some sort of giant roller coaster I am no roller coaster fan and no fan of tariffs either. So it's an apropos analogy Francis Good to speak with you as ever. Thank you. Thank you. Francis Donald is the chief economist at RBC. Hey, have you joined the group chat yet? Do not worry. Your friends at commotion,

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Across this country, Canadian businesses are already trying to figure out ways to come to grips with what these tariffs will mean for their industry. In Quebec, Rio Tinto is a major employer making aluminum for export to the United States. Here's Union President Donaert Pearson speaking last week. If they put the tariff on 25% for aluminum coming from Canada, the client is going to pay for it. All the people are going to pay for all the people going to pay for parts of their car, for all the packing around. So we're going to pay this and the company is going to send it to the client. Earth's own food company makes plant-based milk, oat, soy and almond milk. Canadian-owned and operated company is

looking to cut American products from their supply chain both as a business move and as a show of solidarity with Canadian workers. Brittany Hall is Earth's own vice president of marketing. Brittany, good morning to you. Good morning. In the immediate impact, what will Donald Trump's tariffs mean for your business? Well, Earth's own has always sourced products

exclusively from Canada. So we always have looked to, the oats we use in our oat milk have been a hundred percent grown in Canada. We, all of our plants across the country, everything we make is made in Canada. So we've always been a Canadian made, a Canadian based brand, and we have no

plans to change that. If you're making almond milk, I don't see a lot of almond trees in Canada. So where do you get to the almonds? Yeah, the almonds needed for almond milk, that's the tougher one. Almonds just don't grow in our chilly winters. So, that said, we're looking to see if we can

source our almonds from Europe, but we need to weigh that against the environmental footprint of shipping them across the country. Also the cost presumably, right? I mean, if you have to get almonds from Europe rather than the United States, will that cost you more? Yeah, we're always looking for whatever the most ethical and sustainable option is.

And it has been the US in past, so we're going to have to weigh that out. How are you doing that? I mean, this is a real time conversation in many ways, like how are you running the math now to figure out as these terrorists are announced and to Francis's point, I mean, they may come off in a week and a half or

two weeks or they might not. How are you, how are you running those calculations? Yeah, we know with the recent news that it's been really tough for our business, just given all of this uncertainty. So we're making decisions to isolate ourselves from the U S impact as much as we possibly can by really doubling down on and sourcing ingredients

from within Canada. We have been really fortunate as a business because Ursone has grown almost exclusively within our Canadian borders. We are a proudly Canadian brand and Canadians have been very supportive of growing Urson and that has allowed us to focus on supporting Canadian farmers, Canadian jobs, and then sourcing Canadian ingredients wherever we can. How much of your business is in the United States in terms of selling your products south

of the border? We're not. So we have grown our business completely within Canada. So there's no sales that would be impacted by tariffs. It's more just the supply chain. Correct. Just supply chain. What have you seen?

We've seen this rallying around the flag in the last little while. People talking about buy Canadian. You go to the grocery store and you will see people looking for the flag on the aisle that will show the thing that they're getting was made here. How much of an impact is that having right now? Yeah, we're at a really interesting crossroads right now. We have this real opportunity as a Canadian business to really innovate and discover these new technologies

and just like better ways of doing business. So we have the potential to do so much more once we get out of the US shadow and really embrace what makes us great. We have got so many smart people and tons of resources and the creativity to really think differently, to let go of some of that interdependence, which has really stopped us from forging our own path.

I mean, that sounds almost optimistic. It is, I think it's up to us to take the next step. And I really hope we do. Because I think now more than ever, Canadians have the power to use our purchases to make this powerful statement, to show this tangible show of support for our country. Brittany, it's good to talk to you.

Thank you very much. Thank you. Brittany Hull is Earth's own vice president of marketing. As you heard, she's trying to figure out in real time how to change their supply chains so that they can be more Canadian and rely less on products coming from the United States.