Canada hits U.S. with $21B in retaliatory tariffs as global trade war heats up

The first shots of President Donald Trump’s global trade war have been fired.

On Wednesday, Canada announced new retaliatory trade duties on approximately $21 billion worth of U.S. goods in response to Trump’s implementation of universal steel and aluminum tariffs.

Canada’s retaliatory measures follow those announced by the European Union on Wednesday, targeting a range of U.S. goods valued at $28 billion, including beef, motorcycles, and whiskey, alongside American-made steel and aluminum. China has also signaled its readiness to respond.

After weeks of threats and negotiations, these tariffs represent among the first new, substantial duties to be imposed by the countries, even as Trump has threatened to impose many more. In addition to supplemental duties totaling 20% on Chinese goods, Trump has suspended other threatened tariffs on Canada and Mexico.

The ongoing back-and-forth threatens to ignite a global trade war that could hinder economic growth prospects worldwide. The Trump administration has attempted to downplay the immediate consequences of the trade volleys while acknowledging that there would be an economic “transition” or “detox” as the president implements his policy goals.

So far, the repercussions have been substantial, at least as measured by market reactions. Broad stock indexes have now erased their post-election gains as investors resist the prospect of higher costs. As the trade barbs flew on Wednesday, stocks relinquished earlier gains that had followed a better-than-expected inflation report, which appeared to provide short-term relief. Shares in U.S. automakers fell. In a note to clients on Wednesday, analysts with Barclays financial services group noted that when Trump implemented similar duties, Ford and GM reported reduced profitability.

The tariff conflict with Canada pits the U.S. against its largest trading partner. Canada is the largest foreign supplier of steel and aluminum to the U.S., and experts have warned that Trump’s duties would likely be passed on to consumers.

In a news conference on Wednesday, announcing the retaliatory measures, a Canadian government spokesman, François-Philippe Champagne, Canada’s minister of innovation, science, and industry, called Trump’s tariffs “completely unjustified, unfair, and unreasonable.” He stated that the U.S. administration is once again disrupting and disrupting an incredibly successful trading partnership, raising the costs of everyday goods for Canadians and American households alike.

Canada’s announcement comes despite a détente being reached with the Trump administration on Tuesday to resolve threats of a 25% surcharge on American consumers of Canadian electricity. Trump had threatened Canada with steel and aluminum tariffs climbing to 50% if the province of Ontario followed through on the surcharge.

The Trump administration has offered various rationales for its trade moves. In the case of the steel and aluminum tariffs, Trump has argued that the countries are taking advantage of the U.S. through their trade policies, citing America’s yawning trade deficit as evidence. However, even as America’s imports are at record levels, so are its exports. Some economists have argued that the tariffs are likely to threaten as many jobs as they might create, given the importance of accessing lower-priced or specialized raw steel and aluminum for American manufacturers of tractors or appliances.

In the case of general trade duties that have been threatened and then suspended on Canada and Mexico, the administration has also highlighted illicit fentanyl flows from those countries. However, last month, Trump provided a more direct rationale for the tariffs onslaught. He declared, “This is the beginning of making America rich again.”

The Trump administration has yet to respond to the retaliatory measures announced on Wednesday but has indicated that it would respond in kind to any such moves.