The Decibel - Making sense of Trump’s ‘Liberation Day’ tariffs

Episode Date: April 3, 2025

U.S. President Donald Trump signed a sweeping executive order on Wednesday to put reciprocal tariffs on goods from most of its international trading partners. Trump called the tariffs a “declaration of economic independence” and accused other nations of stealing American jobs.However, Canada and Mexico, which have been in Trump’s crosshairs for months, are exempt from the new tariffs, as long as they comply with the U.S.-Mexico-Canada trade deal. But higher tariff rates will continue for aluminum and steel, and tariffs are coming on all foreign auto products.Mark Rendell, the Globe’s economics reporter, breaks down the confusing array of new tariffs, the ones that Canada’s still dealing with... and the impact of Trump’s trade war going global.Questions? Comments? Ideas? Email us at [e-mail]

US President Donald Trump called April 2nd Liberation Day, the day he announced new tariffs on dozens of countries. So all day people were waiting to see, you know, what exactly these long-promised reciprocal tariffs would look like. Here's Globe economics reporter Mark Rendell. And at around four o'clockclock the eyes of the world all turned to the Rose Garden where there was you know a large group of people gathered. Donald Trump came out to a you know marching band.

Ladies and gentlemen the president of the United States. And he went on a long monologue that of things that we've mostly heard before. The numbers are so disproportionate, they're so unfair. The friend is worse than the foe. They were taking tremendous advantage of us and I commend them for that. And Howard Lutnick, his Commerce Secretary, comes up with a gigantic, I guess, board, like what you see in a high school or an elementary school science fair. And on it, it has several dozen countries with tariff rates beside them.

It's very windy out here. We didn't want to bring out the big charts because it had no chance of standing. Fortunately, we came armed with a little smaller chart. So this was the big moment of reveal. He was, you know, announcing what the reciprocal tariff rates were going to be on a range of countries. And they were very high. European Union, very friendly.

They rip us off. It's so sad to see. We're going to charge them 20 percent. So we charge Vietnam, great negotiators, great people. They like me. I like them. The problem is they charge us 90 percent. We're going to charge them 40 percent. South Africa. Oh, great people. They like me, I like them. The problem is they charge us 90%. We're gonna charge them 40%.

South Africa, oh, 60%, 30%. And they've got some bad things going on in South Africa. And he was holding it behind this lectern, and so you couldn't quite see if Canada was on the bottom. Turns out Canada wasn't on the list. After months of Trump threatening, imposing, and pausing tariffs on Canada, somehow we avoided these additional, country-specific tariffs. But we're not completely in the clear.

Today, Mark will explain the sweeping new tariffs announced by Trump, the ones that Canada is still dealing with, and the impact of Trump's trade war going global. I'm Maynika Ramen-Wilms, and this is The Decibel from The Globe and Mail. Mark, great to have you here. It's great to be here. So Mark, we're talking around 7 p.m. Toronto time on Wednesday evening.

Trump has just announced this new slate of reciprocal tariffs. They apply to dozens of countries. So what exactly did we see? So what happened today was essentially the kind of tariff war that we in Canada have been experiencing for months essentially went global. Trump stood up and he announced what he called liberation day. It was going to be the moment in which the US was going to broaden out its trade war.

And in many ways, it was much, much more dramatic than I think a lot of people were expecting. There'd been hopes that whatever way they calculated these reciprocal tariff rates, we'd be talking at tops rates of 15%, 20%. In some cases, it's much, much higher than that. The big news today was a 10% across the board tariff that's going to apply to pretty much

every country in the world. That's a huge jump in the tariff rate that the US imposes on other countries. He also announced country-specific tariffs that were much higher than that 10% rate. So he talked about the EU, Japan, China, they're gonna be seeing tariff rates 20, 25%. Canada is an interesting example, because we actually got something of an exemption from this, which we can talk about in a second.

But top line is trade war went global. Okay, and we can talk about in a second. But top line is trade war went global. OK. And we will talk about some of the details of what other countries saw and what Canada saw as well. But let's just stick with kind of looking at some of the basics here, Mark. First of all, these are called reciprocal tariffs. What exactly does that mean?

Donald Trump thinks the United States is being ripped off by other countries. It's a core of his worldview and a core of what he's trying to push back against with his very aggressive protectionist trade policy. What the reciprocal tariffs essentially are is going country by country and saying, you put X amount of tariffs on US goods or you prevent US goods from entering your market for any number of reasons, we're going to hit you with what you hit us. So it's kind of a tit for tat thing.

Problem is nobody knows how these rates have been calculated. It's very clear it's not just looking at what tariff rate other countries put on US goods. It seems to be some combination of the tariff rate, the market access, all that kind of stuff. Okay. So it's not just exactly the tariff that the EU puts on it, but there might be other things rolled into it. I know when we talk about Canada, right, it's our digital services tax is also kind of rolled

into this and our GST, right? Exactly. So it could be things like maybe a country doesn't let US beef in because it has certain no genetically modified meat rule or something like that. It could be a whole range of other rules, taxes, health regulations that prevent US goods from accessing other markets alongside whatever actual tariff rate other countries put on US goods. Clearly the US administration has, you know, taken all of these things, thrown it into

a big pot, shaken it up, and it spat out a number, and that number is going to be what they're going to apply to a whole range of other countries. The baseline 10% tariff comes into effect on April 5th. The kind of country by country higher tariff rates will come into effect on April 9th. Okay. And these were applied under an executive order, which is how Trump has been doing a lot of things.

And as you mentioned, Mark, there weren't any of these reciprocal tariffs announced on Canada specifically today. So were we exempt from these? What's going on? So this is the big news from the Canadian perspective is that Canada and Mexico are exempt from this reciprocal tariff system. This is a major win for Canada and Mexico. The way that the Trump administration has explained it is they have already put quite significant tariffs on Canada and Mexico. You might remember in early March,

Trump made a lot of noise about fentanyl trafficking, made a lot of noise about illegal migration, and he put 25% tariffs on goods from Canada and Mexico with a lower 10% rate for energy and critical minerals, potash. So those still remain in place, those tariffs. However, and this is the absolutely crucial part, two days after he put those tariffs in place, he this is the absolutely crucial part, two days after

he put those tariffs in place, he gave a month-long exemption for all goods from Canada and Mexico that trade in compliance with the USMCA, which is the new version of NAFTA, right? So it's the Continental Free Trade Agreement. So if your good gets the USMCA stamp, it will continue to trade tariff three. So the big news today was that one-month extension got extended indefinitely. So to put it in very basic terms, while all other countries around the world are getting hit with a 10% baseline tariff or a higher rate, Canada and Mexico, a large portion of our trade will trade tariff-free as long as it is compliant with the USMCA.

So that in many ways leaves Canada and Mexico in a comparatively good position. OK, yeah, as you say, that sounds like good news for us, because as long as our trade kind of falls under that USMCA agreement, that KUSMA agreement, it'll be OK. Anything else is going to be tariffed, as you said, at those higher rates. But a lot of our trade, I would imagine, will fall under that agreement. Yeah, exactly. I mean, last year, around 38% of Canadian goods that were shipped to the US had the USMCA stamp. So 40%, you know, that suggests 60% wouldn't be compliant. However, the actual number that could theoretically be compliant with the USMCA is quite a bit higher. In the past, a lot of companies had been shipping

goods back and forth without bothering to get the USMCA stamp. But now, you know, with this new set of rules, everybody is obviously going to be dashing to get USMCA compliant so they can trade tariff-free. Let me ask you about autos specifically, because we have been hearing about this 25% tariff on cars and automobiles. What happens with that now? So this is where the good news ends. Autos are still getting hit with tariffs.

Steel and aluminum is still getting hit with tariffs. So the sectors that Donald Trump has put tariffs on directly, and the most prominent being the auto tariffs that come into effect on Thursday and the steel and aluminum tariffs. Those are still in place. That is still going to cause major shock waves throughout the Canadian economy and still going to cause major shock waves, especially in regions that are heavily reliant on the auto industry and the steel and aluminum industry. Now, autos that come from Canada and Mexico are being treated slightly more leniently than autos that come from Japan, Korea, Germany, elsewhere.

If I make a car in Canada and I send it to the US, the US is only gonna put a tariff on the value of the vehicle that isn't made up of US auto parts. Put another way, if I'm a Canadian automaker and I use a bunch of US auto parts, I'm gonna pay a lower tariff than 25%. So, you know, the average Canadian vehicle includes about 50% US auto parts.

That means I'm probably gonna be subject to a tariff, effective tariff rate of about 12.5%. Okay, so maybe not great news for specific sectors, but overall it actually sounds like not as bad as we thought on Wednesday. Mark, how has our federal government, how has Ottawa reacted to everything we learned on Wednesday? So Mark Kearney, the Prime Minister and Liberal leader, was, you know, briefly paused his election campaign and was back in Ottawa. He spoke to

reporters and he said, you know, Canada is going to push back against US tariffs. We're going to fight these tariffs with countermeasures. We are going to protect our workers and we are going to build the strongest economy in the G7. You know, he mentioned the fact that this is a pretty big sledgehammer blow to the kind of international trading system, but also that important parts of Canada and US trading relationship have actually been preserved by having this USMCA exemption remain in place. In the background, of course, there's still those fentanyl tariffs that are in force. Ottawa doesn't like that. It's going to push back.

It doesn't think they're justified. Kearney also mentioned in a tweet that Ottawa is going to continue to support the supply manage agricultural system. So that's the system we have in Canada for dairy, poultry, which essentially means we control the production and we put very high tariffs on everybody else to keep them out of our very specific supply manage system. The US doesn't like that. The US has made very clear that it wants more access to Canadian dairy, poultry and egg markets. You can be certain that when we get to renegotiating the USMCA, that's gonna be one of the very big asks from the US.

So what's actually really interesting here is Trump has said, if you play within the USMCA, we're going to let you continue to trade tariff free. But that also gives him a lot of leverage when it comes to renegotiating the USMCA because it allows him to go to Canada and say, see that deal we gave you, see that exemption we gave you. Well, in return, we would like access to your dairy markets, to your egg markets. And of course, Canada has already put retaliatory measures on the measures that the US has put

on us. I think it's up to about $60 billion of US goods right now that we've targeted. Could that amount increase? Do we know? Yeah, it certainly could. I mean, initially, Canada slapped tariffs on 30 billion worth of US goods when they initially hit us with those fentanyl border migration tariffs. When they came at us with steel and aluminum tariffs, we put an additional 30 billion worth of tariffs

on US goods. So as you say, it's about 60 billion right now. They have a list of about 125 billion worth of additional potential targets. They have held off applying those when we initially got that USMCA exemption in early March. They held their fire on that, but that's waiting on the sidelines. If the US targets other Canadian industries, Ottawa seems pretty ready to respond. We'll be back in a moment. Okay, so Mark, we've got a sense of how Canada is affected by Wednesday's announcement.

Now let's talk about other countries who are being targeted by these US reciprocal tariffs. Can we look at which countries are getting hit? Who was on this list? So the answer is pretty much everybody. Everybody's going to be hit by this 10% baseline tariff. The real question is, are you going to get hit with a higher reciprocal tariff? And this is when you start going down the list and things look pretty grim for a lot of countries. So the EU, for example, they are facing a 20% tariff. That's a major increase from what they had faced before. You go down the list,

you see countries like Japan, again, a major seller of vehicles to the United States. They're facing a 24% tariff. And again, this is on all goods that enter the US then from those countries? This is on all goods. South Korea, another large seller of automobiles and electronics, has been hit with a 25% tariff.

Some are lower. The UK is only getting the 10% baseline tariff. China is being hit with a 34% tariff. Now that's gonna stack on top of tariffs that the US has already put on China. So China is gonna face a considerably higher effective tariff rate. And we have to remember, in many ways,

this whole trade war started in the first Donald Trump presidency with the tariffs he put on China. They are seen by the US as the major geopolitical competitor. They are seen by the US as the country that sucked the most manufacturing jobs out of the United States in the early 2000s. But I think the takeaway that you certainly see us all reflected in the big sell-off in markets and the very negative reaction in oil prices down a whole range of things was just how broad it was. The only comparable would be the 1930s Smooth Holly Act, which a lot of trade historians

look back at as being responsible for essentially fracturing global trade, significantly extending and worsening the Great Depression. So you have to go all the way back to the 1930s to get anything comparable to the kind of shock to the global trading system that we saw today. And it's hard to express as well just how big of a break this is from how trade has been done for decades and decades and decades. You know, since the Second World War, largely in response to the kind of breakdown in trade that happened in the 1930s before the Second World War, countries around the world led by the US

really tried to build this liberal trading order that was based around the idea that countries should lower tariff barriers on each other, you know, liberalize the trade flows, capital flows. But it's just a very dramatic move that the U.S. has made today and a pretty big repudiation of the system that it built itself. Yeah, it sounds like what you're saying really is that these moves are really disrupting the global trade system that we've built over decades. You mentioned a bunch of big trading partners

that have been hit by these reciprocal tariffs. But Mark, a lot of countries on this chart that Trump presented, they're actually quite small. I can't imagine. They're massive trading partners with the US. Why would they be targeted with tariffs? I wish I could see inside Donald Trump's brain. I can't totally tell you.

Some of them, you might say, well, that doesn't seem like a big country, but it's actually a very large trading partner of the US. Vietnam would be a great example. There's other certain Southeast Asian countries. Some of the developing countries that you see on that list typically have higher tariff rates than advanced economies.

So often you'll see with both developing and emerging market economies, they are trying to protect certain industries, whether that is agricultural industries or whether that is manufacturing industries, textile being an obvious example. You know, India, you'll see on that list is a great example. It has quite high tariffs on US goods. It takes a very protectionist approach to trade. They have not liberalized trade as much as a lot of the advanced economies that you see in Europe, parts of Asia, North America.

So can we look at what the end game would be here, Mark? Like, is this meant to be a permanent thing to put these tariffs on all these countries? Is this supposed to be temporary for further negotiations? Like, what is he trying to do? It's not entirely clear how open he'll be to negotiations, but the rhetoric today suggested it was permanent He's trying to achieve a couple of different things with these tariffs Part of it is he wants to raise revenue because he is keen to try to cut the size of the deficit But he also wants to you know offer other tax cuts So you got to get your revenue from somewhere

He thinks he's gonna get a bunch of it by putting what our taxes I mean tariffs are a type of tax on imports coming into the country. He also wants to force companies to set up shop, set up factories in the United States if they're going to sell it to the US market. So again, if you are trying to convince Toyota or Honda or Hyundai or VW to build their next plant in Ohio or Michigan or something like that, the tariffs would theoretically need to be permanent. So, you know, companies aren't going to make massive years long investment decisions based on trade policy that's going to fluctuate or change. That being said, if Donald Trump's behavior in recent months suggests anything is that he is changeable, he is erratic, he

does seem to be open to negotiation on some things. But the way he pitched it and the way he spun it today did suggest that this is part of his vision for a new economic order, and it seems to be in place. I got to say, this does sound really complicated to implement though, right? You've got all these different countries with different tariff rates. Is this gonna be difficult for the US to actually do?

I think the answer is probably yes. There was a world in which it could have been infinitely more difficult if the US had gone product by product and tried to match it. So if they went and said, EU puts 10% tariffs on American cars, so we're going to put 10% tariffs on VWs. Or you put 5% on cheese, I put 5% on cheese. You put 5% on cheese that has a hard rind on it. I do the same. And down the list, pretty soon you get into the hundreds of thousands, you get into the

millions of tariff lines. So that was like, when the idea of reciprocal tariffs was first announced, that was like everybody's nightmare scenario, which would have actually been impossible to do. The idea of going country by country and putting it like slapping a rate on it, I'm sure the customs agents can figure that out. Having a tariff rate, specific tariff rate for each country is more complicated than the world we've been in, but it's not as complicated as going product by product and trying to match tariff rates.

Of course, we have not seen a full response yet from all of the countries affected. This announcement was made when it was evening in Europe, night in Asia, so I'm sure by Thursday we will get some of the responses. But do we have a sense of how countries might respond to this? Yeah, I mean, in the lead up to this announcement, there was noises out of the European Union, out of Japan, Korea, various others saying we will retaliate to tariffs. I suspect we're going to see those plans shaping up

in the coming days. But I would expect to see retaliation from most countries that are hit by these tariffs. Before I let you go, Mark, we've been waiting for this April 2nd day for a while now. This was supposed to be the date when the Trump administration would provide clarity on all the tariffs that they plan to impose. Now that we've had this reciprocal tariff announcement, has this provided the clarity that countries have been waiting for about what's going to happen?

It has definitely provided some clarity, and I think that's very important. So far the biggest economic impact of these tariffs, of this trade war that we've been in for months, isn't actually the effect of the tariffs. It's the uncertainty it's created. It's the fact that if I don't know what the rules are going to be tomorrow or the next day, I'm not going to go out and make a big purchase. If I the next day, I'm not gonna go out and make a big purchase. If I'm a company, I'm not gonna go invest. I'm probably gonna freeze hiring because I don't know if my product

is gonna even be welcome in the US in two months time. So why would I go hire another hundred staff? Having some clarity around what will and will not be subject to tariffs, I think is gonna be huge. Certainly in the Canadian context, you're gonna see a lot of companies scrambling to get their USMCA compliance.

So in practice, that means they gotta go get all the paperwork together to show where all of the inputs into their products come from. So it's gonna be some good work for lawyers and accountants in the coming weeks, I am sure. In some ways, it provides clarity. I think that is true to a significant extent in Canada. I think it's going to be very confusing for a lot of other countries.

I think it's going to be chaos. We're going to see retaliation. Clearly markets are already showing big spike in volatility, big sell-off. And it is very much not clear that if countries turn around and retaliate against the US, that the US won't turn around and raise tariffs even more. And then all of a sudden we get into this escalating, spiraling trade war which could wreak havoc on the global economy. So, we know more than we knew yesterday, but there is a lot that is unknown. When you start a trade war, when you break a trading system, when you smash a carefully constructed set of norms and rules.

It's unclear what's gonna follow. And I think we're gonna find out in the coming months. Well, Mark, thank you so much for taking the time to be here. I know it's been a busy day, so appreciate it. Hey, it's great. I love talking about tariffs. That's it for today. I'm Maynika Ramon-Wilms.

Our associate producer is Aja Souter. Our producers are Madeleine White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.