Trump raises tensions with Canada by announcing new 50% tariffs

Jeff Bennett:

The Trump administration is imposing a new round of tariffs on Canada, accusing the country of unfairly discriminating against American cars, dairy products and alcohol. The 50 per cent tariff would cover $20 billion worth of Canadian imports of goods ranging from cement to hockey sticks. It is scheduled to take effect within 30 days.

In the Oval Office today, President Trump defended the move.

President Donald Trump:

Canada has been very strict with us over the years, for many years, and no other president has done anything about it.

I love Canada. I love the people of Canada. Many friends who live in Canada. But their leadership from Trudeau to the current leadership, I mean, in all fairness to them, they need us to survive. Without us, there is no way they can survive.

Jeff Bennett:

Canadian Prime Minister Mark Carney pledged to intensify talks with the United States in the coming weeks in the hope of reaching an agreement.

Joining us now is Natasha Sarin, co-founder of the Yale Budget Lab.

Welcome back to the program.

NATASHA SARIN, head of the Budget Lab at Yale University: Thanks for having me.

Jeff Bennett:

So, how significant would these 50% tariffs be, if they go into effect in 30 days, not just for Canada, but for American businesses and consumers?

Natasha Sarin:

Yes, the important thing to understand about these tariffs, to put them in some context, is that they cover about 5 percent of imports from Canada. And so it’s very important for the specific product lines that we’re talking about here.

My colleagues at the Budget Lab estimate there are about 550 of them, like dairy products, alcohol, and hockey sticks, as I mentioned. But in the overall picture of our trade relationship with Canada, this is one particular little piece.

This would raise the effective tariff rate with Canada significantly, in part because tariffs are being imposed at such a high rate. You’re talking about a 50 percent tariff on a narrow base of products. This is critical, but it doesn’t cover a wide range of everything we import from Canada.

Jeff Bennett:

So, is there reason to believe that this high tariff rate on a narrow base of products will never come into effect, and that it is all just designed to negotiate a deal?

Natasha Sarin:

The actual tariff rate in the United States has changed more than 60 times in the second Trump administration, and this is just counting the tariffs that have already gone into effect, not the fact that we have seen a lot of announcements about future activities with respect to our trading partners that were ultimately rolled back or changed in the negotiation process.

This is obviously a very active and lively conversation. The administration has clearly been very clear about giving itself a 30-day delay in terms of implementing these tariffs in order to continue talks with Canada.

But I think, to some extent, one should not take comfort in the fact that you might not actually see tariffs at this level on this set of products applied, because the volatility of the trade environment, the fact that if you’re someone who’s importing some of these goods from Canada, you have basically no idea what the trade environment is going to be bringing the goods into this country in just a few weeks, makes it really difficult to try to run business and really difficult from Canada’s point of view. The American consumer, who sees as a result of this volatility an increase in the prices he pays.

Jeff Bennett:

When the administration says Canada has unfairly discriminated against American products, this is the argument they make. How strong is this argument?

Natasha Sarin:

One of the things that I think is really important to clarify a little bit is the timing of the alleged improper practices on behalf of Canada with respect to our products.

A lot of what’s going on in this context is that there’s frustration in the United States or among some administration officials that Canada has actually retaliated with the tariff increases that we’ve had on Canadian imports over the last year and a half.

And so a lot of the practices that you’re talking about, especially in sectors like alcohol, are related to retaliatory actions that were taken once the United States had this trade war. And so it seems a little difficult to make the argument that we — as a result of the fact that there were prior tariffs that we imposed on them that led to these retaliatory measures, that we will then see another set of tariffs imposed.

And that makes it difficult because it’s kind of like a never-ending cycle in terms of escalating in ways that make it difficult to actually see the path forward.

Jeff Bennett:

Difficult and confusing, for sure.

There are viewers who will watch this conversation and may wonder, didn’t the US Supreme Court invalidate the Trump administration’s tariff regime? And they would be right. So what is…

Natasha Sarin:

They will do it.

Jeff Bennett:

Yes. What is the legal basis adopted by the administration in this regard?

Natasha Sarin:

This is a good question.

And the way I was describing the nature of the administration’s actions in the wake of the Supreme Court’s decision in February is that they were certainly consistent with the letter of the ruling because the case was about a particular authority, the International Emergency Economic Powers Act, that the administration was using to impose these broad-based definitions.

But they are not in keeping with the spirit of this ruling, which made clear that the power to tax and impose these kinds of broad tariffs on allies and adversaries alike rests with Congress, and Congress alone.

And so, eventually, we’ll see these new powers deployed by the administration to kind of patch together their old business practices, and we’ll see who gets challenged legally. A host of these cases are already making their way to the Supreme Court.

Ultimately, it will be for the court to rule and decide whether or not this type of broad-based authority exists in these other laws. But I think their answer is unlikely to be yes, because this set of powers falls under Congress.

Jeff Bennett:

Natasha Sarin, Co-Founder of Yale Budget Lab It’s always a pleasure to talk with you. Thanks.

Natasha Sarin:

Thank you very much.