Sean McBride, the owner and winemaker of Crosby Roamann in Napa Valley, California, joined The Lead on CNN to discuss the impact of tariffs. Photo courtesy of CNN Newswire.
New York — President Donald Trump on Monday threatened to ban the sale of Canadian Bombardier jets if they are not built in the United States, hours ahead of Canada moving forward with $20 billion worth of retaliatory tariffs on American goods, which are set to take effect at 12:01 a.m. ET on Tuesday.
Canadian Prime Minister Mark Carney has stood firm on the country’s countermeasures and has signaled he will match any future trade actions Trump enacts.
The latest spat marks a new, more vicious chapter in the rapidly escalating trade war between the two countries.
The new levies will include a doubling of taxes charged on American aluminum and steel to 50%, matching the rate the US charges on the metals from Canada. Paper products, construction materials, home appliances and agricultural products are also facing fresh duties.
Trade talks between the two nations, which are top trading partners with one another, broke down last month at the 11th hour. Trump had initially pushed back his self-imposed deadline for the tariffs, touting a deal that was within reach. But the two sides failed to bridge their remaining differences as negotiators haggled over the final details.
Since then, Trump and Carney have traded increasingly pointed jabs. Trump went as far as renaming Lake Ontario as “Lake America,” threatened to double auto tariffs to 50% on January 1, and now has threatened to ban one of Canada’s top aircraft companies from selling in the US unless they are built there.
“If they want our Market, they must build here, and stop treating America like a ‘piggybank,’” Trump said in a Truth Social post Monday.
In a response to CNN, the Montreal-based company said it maintains a significant manufacturing presence in the US, and has continued to expand in the country. “The American aerospace industry is a clear winner on trade and exports. Bombardier is a strong contributor to the sector, creating tens of thousands of jobs across the United States,” it said.
Throughout the trade talks, Carney has accused the Americans of not negotiating seriously.
“When the Americans stop doing memes, stop throwing shade, stop trying to be tough and start being serious about having those discussions — we can have those discussions,” Carney said last week.
The intensifying trade war between the two neighbors is unfolding just two months before the US midterm elections, putting Republicans in competitive races in the position of explaining their views on tariffs imposed by the president. That includes Sen. Susan Collins of Maine, who faces a tough reelection fight and has criticized Trump’s tariffs.
Canadian Minister of Industry Mélanie Joly said the government is specifically tailoring its countermeasures to “put political pressure” on the Trump administration to reconsider its actions. Ottawa, however, exempted American seafood from the 25% duties — a move that spared industries in key states such as Alaska and Maine from a potentially significant hit.
Trump is all but certain to respond to these countermeasures, prompting yet another response from Carney. This next tit-for-tat could hit closer to home.
Ontario Premier Doug Ford has said that his province could put restrictions on electricity exports to the border states it supplies, such as New York and Michigan.
Why talks broke down
Canadian officials said their American counterparts pressed Canada to change rules governing how prominently Canadian and French-language content is displayed on streaming platforms, as well as product labeling requirements for English and French. Carney has defended those protections as fundamental to Canadian culture.
“For the Americans, questions about the French language, Quebec culture, francophone culture and Canadian culture are irritants. Here in Quebec, here in Canada, they are rights, fundamental rights,” Carney said last month.
Trump, meanwhile, said, “I would never interfere with Canadians speaking French!” He added in a Truth Social post that he viewed Carney’s stance toward the US as an attempt to strengthen his political base.
US Trade Representative Jamieson Greer has denied that discussions over French-language requirements were what caused the talks to collapse.
Carney portrayed that as a reversal from the discussions that took place. “All of a sudden, they don’t care about Canadian language or culture and those elements. Well, if they didn’t care, they shouldn’t have kept them in the deal,” Carney said last week.
US Commerce Secretary Howard Lutnick said the deal fell apart because of last-minute requests Canadian trade officials made, including tariff relief for trucks. The US currently imposes a 25% duty on those vehicles, with exemptions for the portion of each vehicle that complies with the trilateral trade agreement between the US, Canada and Mexico that Trump brokered during his first term. The same 25% duties apply to cars and car parts.
As part of the preliminary deal, the US had agreed to lower auto tariffs to 15%, “with the possibility of going down to 7%,” Greer said in an August interview with CBC News. He also said that they agreed to halve levies on steel and aluminum to 25%.
Who has the upper hand?
On the sidelines of the G20 meeting last week, US Treasury Secretary Scott Bessent suggested the US has the upper hand in the trade war. “I don’t think you can be in a tit-for-tat with someone who’s 13 times larger than you are,” he said in a CNBC interview on August 31.
While it’s true that the US economy is 13 times the size of Canada’s in terms of gross domestic product last year, that doesn’t mean the US can walk away unscathed.
However, Trump on Friday said the US would save money by cutting off trade with Canada. “If we don’t do any trading with Canada, we just end all trade with Canada, we’d save ourselves $90 billion.”
But the US-Canadian trade relationship is such that both sides rely on each other for goods that can’t easily be substituted from other trading partners, multiplying the pain both sides feel, irrespective of the size of their economies.
In general, when a trade war breaks out, the smaller economy has more to lose compared to the larger one, said Ari Van Assche, a professor of international business at HEC Montréal who specializes in international trade. That’s because bigger economies tend to rely less on trade to access goods and services compared to smaller economies.
Take, for instance, Ford’s automotive factory in Windsor, Canada, which produces specialized engines for some of the American manufacturer’s biggest trucks.
“It’s difficult for (Ford) to say, ‘Ah, no problem. We’re going to import it now from Mexico,’ because the components made in Mexico are very different,” Van Assche told CNN.
Since businesses often negotiate pricing contracts well in advance of when goods reach ports, consumers on both sides of the border are unlikely to see immediate effects of the new duties, said Gordon Hanson, a professor at Harvard University’s Kennedy School who studies trade and immigration.
But by next summer, they could see markedly higher prices.
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