By William Crooks
Local Journalism Initiative
In a move that has sparked alarm across Canadian economic and political circles, former U.S. President Donald Trump announced again on Jan. 20, 2025, a potential 25 percent tariff on all Canadian goods, set to take effect on Feb. 1. The announcement was part of a series of executive actions targeting trade and other policy concerns, according to a report by The Associated Press. This measure, if implemented, could have sweeping consequences for Canada’s economy, given that 70 per cent of its exports head to the United States.
Mathieu Arès, a professor of applied politics at the Université de Sherbrooke and director of the Pôle de formation en coopération internationale (PFCI), offered his insights into the implications of such a tariff in a recent interview. Arès explained, “A tariff is simply a tax on imports, which is ultimately paid by the consumer. It’s an old financial tool, but its effects can be deeply disruptive.”
Arès described the potential consequences for Canadian industries, particularly in provinces like Quebec, which heavily exports hydroelectricity to the United States. “While it might seem advantageous in the short term to use electricity exports as leverage, it risks damaging long-term reliability,” he noted, emphasizing that retaliatory actions could result in Canada being seen as an unstable trade partner. Beyond hydroelectricity, other major exports such as lumber, agricultural products, and manufactured goods—particularly auto parts—would face increased costs, reducing their competitiveness in the U.S. market.
Speculation surrounds the scope of the tariff. While some suggest exemptions for critical goods like energy and auto parts due to their integral role in U.S. industries, Trump’s announcement implied an across-the-board application. Arès, however, expressed skepticism about its feasibility. “I think it’s a bluff,” he stated. “Such tariffs would drive inflation in the U.S., increasing costs for essentials like cars, agricultural products, and energy.”
The interdependence of the two economies complicates the situation. “Every day, over a billion dollars in goods cross the Canada-U.S. border. Tariffs would jeopardize jobs on both sides,” said Arès. He highlighted voices of dissent within the U.S., including state leaders like Michigan’s governor, who criticized potential tariffs on Canadian auto parts. “Michigan relies heavily on Canadian suppliers for its auto industry. Disrupting this supply chain would hurt American jobs as much as Canadian ones,” he explained. Arès also mentioned Texas, noting the state’s significant trade relationship with Canada, particularly in energy and agricultural products.
Discussing Canada’s potential response, Arès referenced comments from Liberal MP Chrystia Freeland, who suggested reciprocal tariffs. He called this a “worst-case scenario,” noting that while Canada would need to retaliate, it would likely suffer more in a prolonged trade war due to its reliance on U.S. markets. “Our best allies will be U.S. states and industries that recognize the mutual damage such policies would cause,” Arès added. He emphasized the importance of leveraging regional relationships to mitigate harm.
Arès also delved into Trump’s motives, linking them to his background in real estate. “Trump views trade as a zero-sum game, where one party’s gain is another’s loss. By leveraging trade deficits, he’s trying to force concessions in unrelated areas like defense spending,” he said. According to Arès, Trump’s approach prioritizes short-term leverage over long-term economic stability. “For example, Canada has faced pressure to increase its military budget. By threatening tariffs, Trump may be seeking commitments in areas outside trade,” he said.
The timing of the tariff announcement has raised concerns about its potential impact on U.S. inflation. Arès pointed out that rising costs in sectors like energy and manufacturing would likely lead to higher consumer prices in the U.S. “If inflation rises sharply, the honeymoon for such policies will be very short,” he cautioned. He also noted that financial markets have reacted negatively to the threat, suggesting that U.S. businesses and investors are wary of the broader implications.
Arès highlighted the economic theory underlying free trade, contrasting it with Trump’s transactional approach. “Free trade isn’t a zero-sum game. It’s about mutual benefits. For instance, it’s better for Canada to import oranges from the U.S. and export maple syrup rather than trying to grow oranges in Quebec,” he explained, referencing classical economic theories from Adam Smith to David Ricardo.
Despite the dire implications, Arès struck a note of cautious optimism. He suggested that Trump’s tariff threat may ultimately be a negotiating tactic aimed at securing concessions. “At the end of the day, Trump’s strategy is about leverage. He’s betting that Canada will blink first,” he said. However, he warned that such tactics could backfire if they erode trust and damage long-term economic relationships.
The coming weeks will reveal whether this threat materializes or fizzles as part of a broader negotiating strategy. For now, Arès thinks Canada must prepare for all scenarios, balancing resilience with diplomacy to safeguard its economic future.