Canada fights tariffs with tariffs

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0:27Sierra Juarez:This is the Indicator from Planet Money. I'm Adrian Ma. The trade war between the U.S. and Canada is entering a new phase. Back in August, President Trump slapped 50 % tariffs on a range of Canadian goods, and now Canada, one of our closest trading partners, is fighting back. Today, counter-tariffs, ranging from 15 % to 50%, kick in on imports from the United States. And that'll affect everything from steel to dairy products to electronics. And so we felt like this was an appropriate time to check in with a friend of the show. Paul Haverschrud. He hosts a podcast called Cost of Living, which is a show about money and economics from the CBC.

1:06Sierra Juarez:And the CBC, for those who don't know, is the Canadian Broadcasting Corporation, sort of like a NPR cousin to the north. So I guess in a way, Paul, we're practically related. We absolutely are. We keep talking, though, in like not happy family reunions. It's always it's always. Hopefully we're not in like a family feud of some kind. Like, Are we cool? Oh, CBC and NPR are great. And you and I, Adrian, are super cool. After the break, Paul's going to help us understand how Canadians are thinking and feeling about this situation and tell us how Canada's trade war strategy is just starting to take shape.

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2:30Sierra Juarez:Dell.com slash Dell-Pro. Built for you. This message comes from Edward Jones, where they believe rich means opening yourself to new possibilities. That's why your dedicated financial advisor meets you where you are, helping you move forward with confidence. Let's find your rich. Edward Jones, member SIPC. So, Paul, the last time that we spoke, it was January 2025. There were hardly any tariffs between our countries. And now we're looking at U.S. tariffs on more than$20 billion of Canadian goods, including dairy, alcoholic beverages, cement, even hockey sticks. And in response, Canada has, as of this recording, put on roughly$20 billion in tariffs on American goods.

3:19Sierra Juarez:And so I'm wondering, when it comes to U.S. tariffs on Canadian goods, which ones are Canadians most concerned about? Well, the most unnerved is what's happening with autos. Because really, when you look at what we call Kuzma, what you call the USMCA, used to be NAFTA, our free trade deal, really at the heart, it's an auto pact. We've had an auto pact since 1965. Both sides have agreed on it. It's done good things for our auto industries on both sides of the border, auto workers. and it really seems like what the U.S. is coming after or what the Trump White House is coming after is our auto sector.

3:54When you say Canada's auto sector, what kinds of things are they making there? Well, we make cars and trucks here. We make the Chevy Silverado. We make some other medium and heavy-duty trucks. We have a big parts sector. And yeah, all of that is being hit and adding incremental costs to the price of cars.

4:12Sierra Juarez:So with these tariff threats coming from the U.S., Canada has responded. What's Canada's overall strategy with their counter tariffs? It's kind of simple. It's just we have to stand up to the bully, essentially. Canada doesn't want these counter tariffs. They're going to make the stuff we buy more expensive. But nationally, again, we're also willing to accept it, willing to accept economic pain, higher prices, because what's the choice, Adrian? We just roll over and then the bully keeps coming back for more. So then strategically, if we zoom in on like what is our strategy, what are we targeting?

4:48Well, we're going after stuff in swing states like Ohio, like Pennsylvania, some other border states. And the hope here is that the counter tariffs will put some political pressure on the White House ahead of the midterms. About 80 percent of our counter tariffs are for industrial inputs. So stuff that's not super sexy, steel, aluminum, the rest are for consumer goods. And if you look at the U.S., you have what? A$30 trillion economy. So 20 bill on that is less than 1%. The reality is most Americans are not going to notice these counter tariffs. But strategically, Adrian, Canada is looking to cut narrow but deep with these.

5:25Sierra Juarez:I mean, I understand bourbon is also a flashpoint in this round of trade disputes. Is that right? Well, it is. And that really gets to Canada's counter tariffs cutting narrow but deep. I mean, we have nothing against the good people of Kentucky or their bourbon, but we buy as Canadians a lot of Kentucky bourbon. It's not a federal government thing. Eight of our 10 provinces have decided on their own. Yeah, we're mad at what's happening. We're angry. What can we do to get back at the Trump White House? We control our booze purchases. So we are not going to stock that in provincially controlled stores anymore.

6:03Sierra Juarez:You know, we should mention here that even more tariffs could be on the horizon. President Trump announced more punitive tariffs on Canadian cars and trucks that would go into effect January 1st. And you started to talk about the auto industry before. But what would these even more serious tariffs mean for Canada's auto business? You know how in Ghostbusters, when Bill Murray asks what would happen if we cross the streams and Egon says it would be bad? Adrian, those tariffs for Canada, they would be bad. Like that's it. 50 % tariffs on Canadian autos is like an existential threat to our car and truck industry here.

6:44It would potentially decimate Canada's auto industry. it would blow up an auto pack that has been good for both sides of the border, automakers on both sides of the border, and car bars on both sides of the border since 1965. So it's such an existential threat. Maybe it's just a move. It's trying to get us back to the table and get some leverage in a future trade deal. I mean, it's still January 1st is, what, four or five months away. We've got some time to get back to the table.

7:11Sierra Juarez:How are everyday Canadians feeling about this? Like, is it water cooler conversation? Are people talking about it around the kitchen table? It absolutely is. It's very present because we get a lot of U.S. media up here. We can't help but hear everything that's being said, whether it's about the terror specifically, whether it's the Lake Ontario stuff. The 51st state nonsense has really, really played up here. I mean, that has really got us riled up. You're referring to President Trump's executive order renaming Lake Ontario to Lake America and then his references to Canada being the 51st state.

7:49And referring to our prime minister as governor. I mean, that's just it's disrespectful. All of a sudden you take this from, OK, you're having a trade dispute which can exist over here to something that is much more fundamental to us. It's speaking to our sovereignty, economic and otherwise. Again, it feels like an existential threat to Canada. So if you think about how this could play in the broader trade discussions, the federal government right now in Canada, the people who are negotiating this, Prime Minister Mark Carney, they seem to have a lot of support from rank-and-file Canadians across the political spectrum.

8:20Sierra Juarez:There's definitely, I think, an element of anxiety that comes along with this, but also it sounds like the mood is sort of defiant. Yeah, absolutely. Because, again, we're not going to crater the U.S. economy. We can't do that. Can we kick in the shins? Sure. Can we make different sectors feel that? And can we hope that eventually cooler heads prevail and you back off? Yeah, but we want sort of a return to more of what has become normalcy over the last, you know, 60 or 70 years. We know Trump has his negotiating style, you know, it's just attack, attack, right? What about the Canadian government?

9:00Sierra Juarez:Do they have an incentive here to make concessions or do you think they're locked in for now? Absolutely. We have a ton of incentives to make concessions. We're kind of slow playing this a little bit as much as we can, but we also know this$20 billion of tariffs we're talking about right now, this isn't even the main event. We're still not even talking about KUSMA or USMCA renegotiations or negotiations, which we still have to get into, right? So we know if we roll over right now on this 20 bill, then what starting position are we coming at when we sit down at the table for those negotiations?

9:34Right now, it does look, Adrian, like Canada and the U.S. are doing some signaling back and forth to each other.

9:40Sierra Juarez:Paul Haverschrud is host of the podcast Cost of Living from the CBC. Paul, despite all the geopolitical tension, I'm glad there's no public broadcasting tension between us. We're always cool, Adrian. Looking forward to having you on our show. If you like this program and find value in it, the easiest way to support our independent journalism is by joining NPR+. Go to plus.npr.org, which will get you bonus episodes, invites to virtual events, and sponsor-free listening. This episode was produced by Cooper Katz McKim with engineering by Robert Rodriguez. It was fact-checked by Sierra Juarez and edited by Julia Ritchie.

10:19Sierra Juarez:Cake and Cannon is the show's editor and the indicators of production of NPR. This message comes from Capella University. You know that feeling when there's a spark building inside you that you were meant for more? That's your own drive pushing you towards what's next. Capella University gets that. With their FlexPath learning format, you can set the pace and earn your degree without putting life on pause. You've built experience and know what you're capable of. Now, this is your time to turn that momentum into more. The only real question is, what can't you do? Learn more at capella.edu. you.

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