The Decibel - What Canada did on trade war, day one

Episode Date: March 5, 2025

U.S. President Donald Trump‘s 25 per cent tariffs are now in effect on Canadian goods entering the U.S., with 10 per cent on energy. Prime Minister Justin Trudeau hit back with countertariffs on $155 billion worth of American goods.If the trade war continues, inflation will start to rise, jobs will be lost, and economists project a likely recession. And with growing sentiment that Trump’s motivations could go beyond stated security concerns at the Canada-U.S. border, Trudeau is taking a more blunt approach.Campbell Clark, the Globe’s chief political writer, joins the show to break down the first day of the trade war, and what Trudeau’s response tells us about this moment.Questions? Comments? Ideas? E-mail us at [e-mail]

So today, the United States launched a trade war against Canada. Prime Minister Justin Trudeau addressed the U.S. tariffs in a press conference on Tuesday. Canadians are reasonable and we are polite, but we will not back down from a fight. Not when our country and the well-being of everyone in it is at stake. The tariffs went into effect on Tuesday, March 4. All Canadian goods entering the U.S. are tariffed at 25 percent, except for Canadian energy and minerals at 10 percent. In response, Canada hit back with retaliatory tariffs.

We're going to fight and we're going to win. If the trade war continues, inflation will start to rise, jobs will be lost, and economists project a likely recession. To help us understand how Canada is responding, we're talking to Campbell Clark. He's the Globe's chief political writer. He'll break down the first day of the trade war and what Trudeau's response tells us about this moment. I'm Menaka Raman-Welms and this is The Decibel from the Globe and Mail.

Campbell, thank you so much for being here. Thank you for having me. So Campbell, we're speaking late Tuesday afternoon. The U.S. tariffs came into effect at 1201 Tuesday morning, and Canada's countermeasures came into effect at the same time. So what exactly are we doing to respond? So it's tariffs on American goods, but in a sort of staggered order. It's going to be $155 billion worth of goods that will be hit by tariffs, the same 25% as the Americans hit on us. But it starts at $30 billion now, but the other $125 billion is going to wait for three weeks of consultations,

essentially asking Canadian companies if they can live without these things or find them elsewhere. The first group is things like orange juice and wine spirits, Kentucky bourbon, motorcycles, pulp and paper, things, generally speaking, that the Canadian government feels will cause some economic harm in the United States, they'll miss the market and things that we won't necessarily miss here in Canada, we won't be able to live without or we'll be able to buy elsewhere. Okay, so the idea with this Canadian response is then to try to hit the Americans in places where it might hurt to try to not impact Canadians as much as possible then it sounds like.

Exactly, if you put them on things that Canadians use a lot and can't get elsewhere, then there'll be inflation in Canada because they'll have to pay for those tariffs. Of course, we know Canada is going to feel the effect of these tariffs anyways. What kind of impact have they already had across the country? Well, I mean, there have been some reports of companies either starting to lay people off or considering layoffs.

But I mean, the biggest impact they have had already is that companies have declined to order or reorder from, you know, American companies have been pausing or holding back orders from Canadian companies because they worried that when the orders came, they didn't cost an extra 25%. It's already going to be slowing down trade pretty quickly. AMT – And we are also talking about how this is going to affect Americans on the other side of the border. Do we know if there's been any impact on that side of things?

MG – I don't think we know about too much in the way of trade impacts already, but you know the stock markets were the first thing that we saw go yesterday, right? They lost a couple of percentage points yesterday and a couple of percentage points today. So, you know, there has already been an impact on people's retirement savings because the stock markets were surprised that this was going ahead. Okay. So we've definitely seen an economic impact on that scale, at least already. Let's talk about the response a little bit more in Canada, Campbell. We've heard comments from premiers across the country on Tuesday generally supporting the federal response. I want to specifically ask you about the response from Ontario Premier Doug Ford.

He's of course the Premier of the largest province. He's also a very vocal spokesperson because he's chair of this Premier's group called the Council of the Federation. So what did Ford say on Tuesday about how Ontario specifically is going to respond? Yeah, so Doug Ford just won an election on the topic of standing up to Donald Trump. Aside from doing the things that we thought he was going to do before, like pulling American liquor off the shelves. We're the largest purchaser of bourbon in the world for Kentucky bourbon manufacturers.

They're done. They're gone. And canceling contracts with Elon Musk's Starling. He's saying that he is going to hit three US states with 25% surcharges on energy, electricity. We want to do the first part, a 25% surcharge. We have contacted the governors, senators, congresspeople. The letters are going out this afternoon to tell them that's exactly what we're going to do. If they go further into April, then we'll cut off their electricity.

Now, it's not all that clear when that's going to go into effect. He seems to be still sort of trying to work out the details, but that's a pretty potent threat and he sent that apparently in a letter to three governors of US states. Yeah, that does seem like a pretty significant move if this does go into effect. Do we know if other premiers across the country are also contemplating similar moves? We don't really know about similar moves yet. Francois Legault in Quebec sort of said, you know, those bigger measures might come down the line. He announced, for example, that American companies

would be charged a 25% penalty if they sold anything to the Quebec government, which is a much milder response, but it's still a procurement measure that will essentially act like a bar to American goods. But the big question of whether he would pull the plug on Quebec's hydro power to the US Northeast, he didn't clearly say. Okay. And while we're on the topic of energy, of course, I'll just bring in Alberta and Premier Daniel Smith because there's been lots of talk about oil and gas exports and how that's going to play into all of this as well. Have we heard from her on Tuesday? We have heard from her. She has complained about the American tariffs and said that they are

unjustified, but we haven't heard any threats to cut off Alberta oil to the United States. Justin Trudeau, by the way, said that when asked that question, said that the most important thing will be unity and keeping the country together. And there would not be any measures that would harm one region of the country more than any other. That's what he has said for some time now, but he is still saying that today. And we should specify of course oil and gas is subject to a 10% tariff. Everything else from Canada is 25%. So it's being hit a little less hard, but it is still being hit.

Yeah, and you can see why that is being hit a little less hard because the US president knows that if it put a 25% tariff on Alberta oil, that can affect US energy prices, gas prices at the pump in the United States, and that's a very visible sign of inflation to American consumers. Okay, so we've talked a bit about the response from premiers across the country, Campbell. Let's now talk about the big press conference of the day, which was Prime Minister Justin Trudeau's press conference Tuesday morning. How would you describe the tone of his response?

Well, I'd say that he was much more critical of the US president, much less bound by the idea that he has to negotiate and prevent this from happening and felt freer to be fairly critical. He referred to the president's justification for these tariffs, the idea that fentanyl is being smuggled across the Canadian border. Trudeau referred to that as completely bogus. He said essentially that he believes the president never really intended to negotiate that this was never going to be stopped and that the president wants to drive the Canadian economy to its knees so that he can annex Canada. So that was some pretty blunt statements of a kind we haven't heard from Justin Trudeau

before. Now, of course, the tariffs are there now, and he's only prime minister for a few more weeks, but he was definitely speaking a lot more freely than he has done ever before. We'll be right back. So, Campbell, let's talk specifically now about some things that Prime Minister Justin Trudeau said in his statement on Tuesday morning. He started off by addressing Americans directly.

So let's listen to a segment of this. I want to speak first directly to the American people. We don't want this. We want to work with you as a friend and ally. And we don't want to see you hurt either. But your government has chosen to do this to you. So, Campbell, what was Trudeau trying to accomplish here? Like, why frame it in this way?

Well, I think it's important to remember that the thing that would or could get these tariffs to be stopped is not just Donald Trump's druthers, it's American public opinion. Justin Trudeau is appealing to American public opinion there to say, your government started this trade where your government is increasing prices in the United States. He actually went a lot farther than that in this press conference and in a way that we haven't seen him do in criticizing Donald Trump. For example, he referred to the United States and the Trump administration siding with Russia over Ukraine and said, essentially, your government is picking Canada as an enemy rather than

Russia. There's an attempt there to tell Americans, do you really agree with the enemies that your president is choosing and did you sign up for war with Canada and friendliness with Russians? I think he's essentially trying to convince Americans that something is happening here that they haven't been paying attention to, but it's not something they will agree with. Interesting. Yeah. You already mentioned that Trudeau touched on the fentanyl issue at the border, which we've heard a lot about as kind of the reasoning for these tariffs. Let's listen to a section of Trudeau's speech here where he actually addresses this

and we'll talk about it. TR – Now the legal pretext your government is using to bring in these tariffs is that Canada is apparently unwilling to help in the fight against illegal fentanyl. Well, that is totally false. Let's look at the facts. Our border is already safe and secure. Far less than 1% of fentanyl flows and less than 1% of illegal crossings into the United States comes from Canada. So he's calling this pretext, quote, totally false. There's that blunt language that you were mentioning before, right, Campbell?

Have we heard Trudeau directly address this question before, like the legitimacy or even the legality of Trump's tariffs? So we have heard him address them, not quite in as stark a manner. So all along since Donald Trump raised the issue of fentanyl smuggling as a potential reason for tariffs, the Canadian government has decided, well, we have to engage on this. We have to promise border measures. We have to name a fentanyl czar to show that we are not lax on fentanyl at the border. But as you know, and as I think a lot of Canadians know by now, less than 1% of the fentanyl

that gets seized at US borders comes from Canada. Mexico is clearly the source of the overwhelming majority of fentanyl products as precursors and fentanyl pills that go into the United States. So what he's doing there is he's trying to tell Americans who don't necessarily know that your fentanyl is not coming from Canada, A. And by the way, there was a poll at the end of January that showed something like 32% of Americans think that it's true or it's probably true that a lot of fentanyl that comes into the United States comes from Canada. So there's significant number of Americans who think, well, that's probably true when Donald Trump says

fentanyl is pouring into the United States from Canada. So Justin Trudeau is trying to counteract that as an argument. But the other part is a legal pretext. So Donald Trump only has the legal power to impose these tariffs because he's declaring an emergency and the emergency is fentanyl and migrants coming in across the border. And if that pretext doesn't exist, he does not have the power to impose the tariffs. So he's trying to tell Americans, your president is making something up that's not true in order to start a trade war with Canada and that doesn't make sense. This is coming back to this idea then of addressing Americans directly

to maybe get the American people to potentially put pressure on their government, it sounds like. Well, look, it's obviously not being a major news issue in the United States for the last three months that Donald Trump has been threatening tariffs on Canada. But then again, you know, there's been a lot of other things going on

in the early days of the Trump administration and it's not been all that real, right? Now they're real. The stock markets have been shaken by it. The companies will have to change their orders. There may be US companies hit by counter tariffs and if Ontario Premier Doug Ford is correct, the US auto assembly plants will be idled in a week or so. So now it's going to have real impacts and people are going to start to notice. And I presume that's why the Prime Minister is trying to get across this point today to

the American people when they starting to listen. This is really a war for American public opinion. That's the thing that will change the president's behavior, if anything. Okay, so in addition to talking about the fentanyl issue, Trudeau also mentioned what this tariff action could actually be about if it's not about fentanyl. So he kind of alluded to this in his speech. Well, let's hear that. So we actually have to fold back on the one thing he has said repeatedly, that what he wants is to see a total collapse of the Canadian economy because that'll make it easier to annex us is the second half of his thought.

Now, first of all, that's never going to happen. We will never be the 51st state. Danielle Pletka So we have Trudeau really addressing these comments of the 51st state very directly here, Campbell. Why does he want to talk about this and bring this to people's attention? Campbell Well, there's a couple of reasons for that politically and sort of logically. One is, there really isn't sort of a clear reason for Donald Trump's tariffs now, other than he wants to impose tariffs. I mean, he did sign a trade agreement with Canada in 2018, which he's now reneging on. But more than that, he's both telling the

Canadian audience that this is somebody who is threatening our very sovereignty, which appeals to the larger point he made to the Canadian audience, which was unity. We have to stand together. This is going to be tough, and we're going to have to weather this, but we're going to need unity. It's also, again, another remark aimed back at that American audience is to a certain extent that this is Donald Trump attacking Canada, attacking your close ally and friend. An intro statement on Tuesday morning, he also singled out US President Donald Trump. So, let's talk about this, Campbell, because this is an interesting section. He talked to the American

people, he talked to the Canadian people. He also spoke directly to the U.S. president. So let's hear a clip of that. Now I want to speak directly to one specific American, Donald. In the over eight years you and I have worked together, we've done big things. We signed a historic deal that has created record jobs and growth in both of our countries. We've done big things together on the world stage, as Canada and the U.S. have done together for decades, for generations. And now we should be working together to ensure even greater prosperity for North Americans in a very uncertain and challenging world. Now it's not in my habit

to agree with the Wall Street Journal, but Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do. So, Campbell, can we talk about the rhetoric that he's using here? Because I find this fascinating. Trudeau's calling him Donald, right? He's using very specific, clear language, small words, like, we've done big things, this is a dumb thing to do. What do you make of that?

Well, look, the first part of it is sort of classic Donald Trump strategy, which is appealing the way to his heart is through his great big ego. And to say we've done great big things together is, you know, a personal approach, you know, we can do more so that it does not immediately come across as an insult. The second part is the insult. He's using the Wall Street Journal there because of what the Wall Street Journal represents, which is a conservative, Republican, American voice that has spoken out pretty extensively against Donald Trump's tariff plans. If there's one part of the Republican alliance in the United States that does not love these tariffs, it is the markets. It's the business leaders in the United States,

who by the way didn't really – we can tell from the way the markets have reacted. They did not really expect these tariffs to come in. They did not price it in. And I'd say they still don't really believe that it's reality and is going to stay. So that's what Justin Trudeau is aiming at in terms of making that statement to the United States. That is the clip that is going to make it onto American television. I'm not in the habit of quoting the Wall Street Journal, but you're a really smart guy, but this is a dumb thing to do. So that is a pretty direct way of saying even your conservative friends think this is stupid. Stop it.

Let me ask you about a couple more things from this speech here, Campbell. One thing we've touched on a little bit is how Trudeau talked about the violation of treaties, specifically the free trade agreement that Canada has with the US and with Mexico, something Trump himself has negotiated. Let's hear what Trudeau said on this. We will also be challenging these illegal actions by filing dispute resolution claims at the World Trade Organization and through the USMCA. So, Campbell, we did have a deal here. What legal recourse do we have in this situation?

Slim to none, really. First of all, the WTO, the World Trade Organization, its appeal body is basically frozen because the years ago the United States stopped naming appellate judges and that continued under the Biden administration. Anyway, the WTO is blocked. The USMCA dispute sort of allows for some kind of compensatory measures, but really this is just a complete breakdown of the USMCA, the trade deal. The United States is reneging on it. The USMCA does allow each party to impose emergency measures. It just does not foresee that one of the parties would use a flimsy pretext claim it's an emergency and then essentially renege on the whole agreement. You know, there is no point to the USMCA if there are 25% tariffs. So in a way,

the Canadian government has been pretty late to arguing the idea that, hey, you signed this thing, you should not be breaking the treaty because it's semi-pointless in the sense that, you know, if the US doesn't want to observe the treaty, there's not much we can do. But you think in this context where the tariffs have been imposed, it's another point, another part of saying to the Americans, hey, you signed this, your own president, Donald Trump signed this, and now he's breaking his word. Are you a country of Welshers, in a sense? In his speech as well, Trudeau mentioned financial relief measures to help Canadians who are

affected by these tariffs, Kimball. People who may lose their jobs or have their businesses impacted. But I guess I wonder how this is going to happen because parliament is prorogued right now. It can't approve new spending. What would need to happen in order to pass this kind of financial relief? Well, it depends what kind of financial relief, but there are a number of regulatory measures that can be done without legislation. So for example, there can be some expansions to employment insurance, things like work sharing for employees, things that are already allowed under the employment insurance legislation that only require regulation to adjust. And there can also be spending measures

that are approved out of existing funds and during an election campaign from royal warrants rather than from parliamentary votes. So, those things can all be done. If there's a grand scheme for a major compensation package for ordinary people, for example, something like the CERB that will probably require legislation. We don't seem to be at that point yet. But you know, we heard Doug Ford, the Ontario Premier talking today about how there would need to be compensation packages that were something like the pandemic. Okay. And so after Trudeau made these comments on Tuesday morning, did Trump respond to any

of them? Well, he did respond in a social media post that was sort of an insulting jive back. It said, please explain to Governor Trudeau of Canada that when he puts on a retaliatory tariff on the US, our reciprocal tariff will immediately increase by a like amount. In other words, if you tariff us more, we will tariff you double. There's no end to that kind of spiral in theory, I suppose. It's not really clear where that's going at all. Certainly, there's going to be a battle for American public opinion going on now. His Commerce Secretary, Howard Lutnick, was doing interviews because people were raising concerns about the effects that retaliatory tariffs could have or even American tariffs

could have on the economy. He said, though, we're not very concerned about the short term. We're really thinking about the long term and how this could bring trillions of dollars of investment into the US economy and create jobs. That's part of the sort of sell job that the Trump administration is going to do to try to keep American public opinion in favor of this kind of thing. Howard Lutnick even mused that there could be some kind of resolution tomorrow, but the

Canadian Foreign Minister, Melanie Jolie, when she was asked about that, she said, well, the only person who does a deal is the president. She said, at the end of the day, none of them know what the president wants. So we're talking about doing a deal with one person now. And it's pretty unpredictable. And we are expecting to hear Trump speak to Congress on Tuesday night as well. So there could be a potential by the time people are hearing this episode that he's actually maybe made some more comments in response to this. We'll have to wait and see. You can bet on it. So, Campbell, we've talked about a lot of things here and things are happening very

quickly these last few days. What are you watching for next though? What could unfold as this week goes on? Well, there's two things I think that we should be looking at. One is how U.S. opinion unfolds because it's, as we've been mentioning, it really still is a surprise to many Americans that this is happening, including in the political system, right? Even members of Congress and senators are saying, Republicans, I'm concerned about this. I didn't really expect this. So that is an evolving thing, especially in the sense that there are Republicans in states that will be affected by retaliatory measures. And I guess the other thing is how this

affects the Canadian political situation and whether the country is sort of onside for compensation packages, bailouts, the kinds of things, if maybe not as extensive as you saw during the pandemic, whether everybody agrees we've got to do these things for this particular threat as well. I think that is going to become a major Canadian domestic issue that will drive a lot of politics for the next little while. And of course, we have the liberal leadership race finishing off this weekend too. So we're actually going to have a new liberal leader, a new prime minister eventually in

just a few days. Liberal leader day by six days from now, prime minister probably about a week later, and maybe calling an election campaign about a week after that. So things are going to move very fast in the middle of a kind of economic crisis we haven't seen for a long time. And it's a pretty chaotic global environment too. So a lot of things happening all at once.

Well Campbell, thank you so much for taking the time to be here. Thank you very much for having me. That's it for today. I'm Maynika Ramon-Wilms. This episode was produced by TifLam. Our producers are Madeline White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer, and Matt Frainer is our managing editor.

You can subscribe to The Globe and Mail at globeandmail.com slash subscribe. Thanks so much for listening.