Why is Trump threatening Canada with new 50% tariffs?

0:00The United States is about to mark its 250th anniversary.

0:05Katie Simpson:And so on the Global Story podcast from the BBC, we're telling surprising tales of American influence on the world stage and in ordinary people's lives all across the globe. We have this ability to export our story and a lot of people have bought it. I feel like the American dream is alive, but not well. From the BBC, it's the United States at 250. Listen wherever you get your podcasts or find us on YouTube. This is a CBC Podcast. Hi, Mike. Welcome to the podcast. I'm excited to be here because normally I spend my time writing for the website, and this time I get to use my voice. And what a voice it is.

0:42Katie Simpson:Mike Crawley is one of our esteemed correspondents here in Washington, D.C. And Katie, I miss you very much. The desk feels empty. I miss you too, Willie. The studio feels empty, though we're happy to have Mike. But you are doing some pretty exciting work right now. Take us through. Where are you and why? Well, I'm backfilling this week on the Nationals. It's my first time hosting. I've heard of it. So it's very exciting. And it's in a very Toronto moment. For those of you who are watching this on YouTube rather than listening on Spotify, I'm going to move out of the way right behind me. See that dark spot in that window out there?

1:15That's the CN Tower. So it's very like I'm having a very Toronto experience. And it's a delightful time.

1:20Katie Simpson:Well, my misfortune of you not being here is the podcast's gain. Because it's really good to have you in Canada this week. because we're going to take a look at the temperature and the relationship between Canada and the U.S. It's been a rocky one over the last 18 months, and it had just a few dramatic twists and turns over the last 24, 48 hours. Of course, I'm talking about those new 50 % tariffs that are going to be imposed on Canadian exports to the U.S., ordered by U.S. President Donald Trump. Canada's been very, very tough on us over the years. for many years, and no other president's done anything about it.

2:02Katie Simpson:I love Canada. I love the people of Canada. Many friends that 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's no way they can survive. But they've been very, very tough over the period of the last 50 years, actually. Well, the White House specifically says these new tariffs are a response to Canada's discrimination against American auto, dairy and alcohol industries. But there is still some time here. It won't be imposed until August 19th. So we will be watching for how each side is going to react in the days ahead.

2:45Katie Simpson:In the meantime, tension was already ramping up between Canada and the U.S. because of accusations that Canada has been mismanaging forest fires and letting smoke drift across the border. Not to mention the fact that trade negotiations have stalled. So this week we're asking, what's up with these new tariffs and what does it say about the state of Canada-U.S. relations? I'm Mike Crowley. I'm Katie Simpson. And I'm Willie Lowry, where CBC's Washington Correspondents, you guessed it, two blocks from the White House and a little change this week.

3:23Katie Simpson:Okay, before we begin, I should say that we're recording this episode at around noon on Tuesday and up until 4 p.m. yesterday. we had a completely different episode planned, more focused on wildfire smoke drifting to the U.S. from Canada and threats of tariffs because of that. But then, Katie, take us through what happened. Everything changed when an email appeared in my inbox, an invitation from a senior member of the White House communications team informing me that I was one of several journalists invited to be a part of a briefing phone call. These are normal things. They happen on a regular basis.

4:00And depending on the subject matter, that's how different reporters get invited. So a number of Canadian journalists were invited to be on this briefing call, along with a number of American journalists, I believe from business news outlets. And essentially what happens is a senior Trump administration official speaks on background to reporters and makes an announcement. So in this case, it was an announcement about a plan to change the trade agenda with Canada. Rarely is Canada the subject of these background briefing calls. Oftentimes they're about what's going on with the war with Iran or other technical issues that the Trump administration wants to be able to sort of clearly state what their objective is and share information with reporters.

4:40So people don't get things wrong, really. It's about getting information out as clearly and as accurately as possible. So I was one of those reporters, and I'll never forget, I'm sitting in this call because I'm in Toronto and I have other duties this week. I'm not necessarily on reporting and I'm sitting there and I'm listening to what the senior Trump administration official is. And I'm sending email notes to the assignment editor of The National saying we have a new lead story. We have a new lead story. I have to go on power and politics right away. I haven't had my makeup done yet, but this is this all happened so fast.

5:11I went on TV without my makeup being done. So that's that's how quickly this all came together. And I wouldn't normally do that, but I did. And I was in the call to listening. Katie got to ask a question to the senior administration official. And one of the things, too, that folks who are outside of journalism don't know is that sometimes these things, they're actually given to us a bit in advance of when we're told to report on them. So the conference call started at quarter after four and it was embargoed until five. So I was busy writing the web story and put it into editing, but we couldn't publish it until the dot of five o 'clock.

5:52And it was a pretty rushed period.

5:55Katie Simpson:How quickly were those fingers moving? Yeah. When I realized how big a deal this story was, it was the eyes were pretty wide and fingers were moving quickly. I won't lie. This all happened while I was commuting home. I picked up my daughter. I thought I was going to have a blissful evening. And then I started seeing your messages. And I got home and said, oh, we certainly have a new podcast subject. Because this is this is really a significant increase from the Trump administration. Before we get there, let's talk a little bit about the basics, Mike. What exactly is this new round of tariffs? How are they going to be imposed?

6:34Katie Simpson:When and which goods are being affected? Yeah, the headline number of the tariffs is big. The rate, 50%. It applies to a pretty wide assortment of Canadian products. And the total amount, if you think of it in terms of how much does Canada export to the U.S. annually that's going to be, that would be affected by this tariffs. It's about$28 billion worth of annual exports. That's Canadian dollars. Now, the White House's justification on this, they laid it out in three presidential proclamations. And they said it's a response to Canada discriminating against three U.S. sectors, alcohol, dairy, auto.

7:18Longstanding complaints? Long-standing in the case of dairy, relatively new on auto and, you know, clearly the alcohol one is a response to those provincial boycotts. Some of the Canadian products that would be hit with the tariffs because there's these lists, they make sense, right? So milk products, cheese, green, dairy, clearly, and just about every alcohol product you could think of. So wine, beer, whiskey, if you're sending that Canadian club or Crown Royal to the U.S., other spirits. But then this is where it gets a little weird. So the White House published a list of Canadian products that are to be tariffed to, in their words, offset Canada's discrimination against the U.S.

8:03auto industry. There's more than 350 items on the list, and none of them are auto-related. There's these random things, candles, Christmas decorations, fishing rods, hammers, plastic cups, and fake beards. But, you know, in all seriousness, these are actual industries that employ people. It's just not clear why the U.S. is tying those products to Canada's alleged discrimination against the U.S. auto sector. There's some significant industries in there, too. There's a bunch of wood products like plywood, paper, pulp products that come from my own province in New Brunswick. There's an iconic Canadian thing, hockey equipment.

8:51So I'm wondering if that's a USA response to elbows up. There's the exemption specifically given to energy, potash, critical minerals. So those things are explicitly not being tariffed. And then the last thing that I want to mention is the actual legal basis that the Trump administration is using to impose this tariff. So it comes from a section of an act that is nearly 100 years old, but has never been used by a president before. So Canada is making history. It's the first country to be hit with tariffs from Section 338 of the U.S. Trade Act of 1930.

9:34Katie Simpson:Yeah, and I was doing a little research on that Trade Act, also known as the Smoot-Hawley Act, essentially created during the Great Depression as a way to try and defend and protect the American economy. At the time, one of the countries that was being targeted was, in fact, Canada, I believe. And there's some economists that actually say the Smoot-Hawley Act and those terrorists made the Depression worse. The other bit of trivia about the Smoot-Hawley Act, it gets mentioned in Ferris Bueller's Day Off. You know, the boring teacher droning on. In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the anyone, anyone, the Great Depression, passed the, anyone, anyone, the tariff bill, the Hawley-Smoot Tariff Act, which anyone raised or lowered, raised tariffs in an effort to collect more revenue for the federal government.

10:37Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. That scene, the Smoot-Hawley Act.

10:47Katie Simpson:A classic movie. And Katie, let's talk a little bit about what kind of impact these tariffs will have on Canada's exports. Yeah. So I was speaking today with a senior Canadian government source that has direct knowledge of what's going on to try to get a better sense of what comes next and sort of what is the overall impact. And Mike, you mentioned the number, but the source told me right now the Canadian government is going through the process of trying to verify the estimate right now. It's roughly around$28 billion Canadian in terms of the amount of goods and products that are going to be hit by this new tariff or these new tariffs if it does come into effect.

11:23But one thing that keeps coming up and almost immediately after this announcement was made yesterday, we were starting to get questions from Canadians about saying, hey, you know, didn't the Supreme Court strike down Trump's ability to do things like this? Wasn't there a court ruling that said, hey, Trump, you do not have the authority to do this? Well, part of the reason why we it's sort of a it's it's sort of an influx situation. So, yeah, the Supreme Court did say, listen, Donald Trump, you tried to impose tariffs on an emergency basis. You actually didn't have the power to do that. So the Trump administration went back to the drawing board and looked at all the other tools in their toolbox, if we can describe it that way.

12:02And they found this other provision. And so this is another one of those situations where the Trump administration says, OK, is this an option? Let's give it a try. Basically, the justification essentially is that because Canada has retaliated against Donald Trump's initial trade actions because that took place, that I that Canada is discriminating against the American economy about you against U.S. commerce. And so we deliberately heard the words discriminate from the senior U.S. government official who is speaking to us about this. We've heard it from other members of the Trump administration because they're trying to sort of give themselves that legal base to say, hey, you know what, Canada is discriminating against us.

12:46And so we do have the legal justification here. What do I expect going forward in terms of that, though? If it's anything like the last sort of round of tariffs that we saw, I would expect that American business owners or American workers or possibly even maybe a union, who knows? But American companies that say, hey, we don't want to pay these tariffs. We don't think these are justified. They may go to court to challenge the Trump administration. And remember, that's who challenged the Trump administration under those first emergency order tariffs. They're the ones that said, hey, I'm a wine importer based in New York City, and you're going to put these tariffs on these European wines.

13:23You're going to kill my business. I also don't think that you legally have the justification to do this. And that was just one of the business owners that came forward to launch that legal challenge. And now we're, even though the Supreme Court ruled against the Trump administration, saying, hey, you can't do this anymore. This is not you don't have the power to do this because it's about taxing. And Congress has the power to tax, not you, Mr. President. And we're now sort of in the legal process into the legal weeds about what's going to happen next in terms of are there going to be refunds? How do people get refunds?

13:51Are people getting refunds now? And it's a whole big technical mess that could very much take some time to sort out. And so we could be headed toward another one of those situations again.

14:02Katie Simpson:So I just want to clarify. You're saying if for that to happen, though, it requires American small businesses to take legal action. And that's that's small businesses or whatever, whoever's going to challenge it, because that's how like Canada, the legal recourse Canada could have. They could go to international trade tribunals. They could go to the trade tribunals within the KUSMA structure. But those things take forever in order to see like somewhat faster action or more direct action. Typically, that's how we see it through the U.S. legal system, through those American companies are like, hey, we don't think you legally have the justification to do this.

14:35Let's launch a lawsuit. Yeah. Yeah. And I was in touch with some trade experts this morning and asking them this specific question is who would have standing to challenge this particular law in court? And the answer that they gave me is U.S. importers who are affected by the move, who are basically the ones that would have to be paying the tariffs on these Canadian products.

15:01Katie Simpson:Kind of shows you, though, just how difficult a spot in some ways, helpless a spot that the Canadian government is in. Yeah, I mean, the Canadian government would be wanting to try and solve this through negotiation, right? I mean, wouldn't you agree, Katie, that it's about really, you know, the positioning and the leverage in the broader talks around the Canada-US-Mexico agreement, that if there's a way for Canada to solve that, that would be – to fend off these tariffs or to get them removed, that's the kind of thing that would have to be sorted out in those negotiations, right? I think there are a number of things that factor play here.

15:38One, I think that Donald Trump fundamentally believes that companies that produce things in North America shouldn't be operating in Canada or Mexico. And he fundamentally wants to take Canadian and Mexican jobs and put them into the United States. I believe that is a genuine thing he wants to do. And he says it out loud. We don't need your cars. We don't need your lumber. We have enough here. And I believe that's an overarching thing there. Yes, ultimately, I think the Americans, well, they've stated it. They want more favorable terms for American companies and American workers. And they have laid that out in public testimony and other decisions that the Trump administration has made.

16:13And so as a result of that, that's like another element of this. They want to continue on, but they want the terms to be more favorable. And so American companies can make more money. So American workers can make more money. So more Americans can be employed with good middle class, well, good income jobs. That's the sort of goal here. And so I think it's I think it's a complicated mix of all of that. And I also truly fundamentally believe that based on what Donald Trump has said, he views himself as tariff man. It goes back to the 2024 election when Donald Trump would go on the road and talk about how tariff was one of his favorite words.

16:50This is the tool he likes to use. He thinks that other presidents were taken advantage of with all these globalization trade deals. And this is this is just another element of that. So I think it's deeply layered and there's a lot at play here. And I think that even if Canada goes into these negotiations and sort of the ball starts to move, ultimately, it's going to come down to what Donald Trump has to say, not necessarily what Jameson Greer and perhaps Dominic LeBlanc, Jameson Greer bearing the U.S. trade representative, being essentially the cabinet minister, cabinet member in charge of trade versus his Canadian counterpart.

17:23I think it's going to come down to Trump and whether he's feeling it.

17:26Katie Simpson:And I think there is a general consensus among Canadians that however the negotiations proceed, tariffs are going to be part of the deal, that tariffs are – No matter what. No matter what, are part of the new reality, the new relationship, not just between the U.S. and Canada, but really between the U.S. and the world. But Mike, Trump has been griping about Canada's restricted dairy market for a long time and certainly for several months over the Canadian province's decision to essentially ban or stop selling U.S. alcohol. But why now? Why these retaliatory actions now? Okay, good question. Let's hear what Katie mentioned, the U.S.

18:11Trade Representative, Jameson Greer. Let's hear what he said. He was speaking to CNBC on Tuesday morning and said basically, well, this is the natural consequences of Canada's actions. In April of 2025, as you know, the president embarked on a new trade policy really designed at reshoring manufacturing production to the United States and getting the trade deficit down after exploding for decades. of all the country and we impose tariffs on on all the world at varying levels of all the countries who retaliated against the United States. One was the People's Republic of China and the other was Canada.

18:49Some of the things they did is they banned the sale of U.S. liquor and other booze on Canadian shelves. They capped and limited the amount of autos that could be shipped to the United States from companies who were reshoring to the U.S. And they also continue to maintain limited space for market access for U.S. dairy. But importantly, they give other countries better deals on each of these three issues. And so it was a natural consequence after a year of these measures being a place and longer in the case of dairy for the president to take action. OK, so one of the key things that he said there is about giving Canada, giving other countries better deals on each of those three issues.

19:32And that's their definition of discrimination, right? So they're giving other countries a better deal than they're giving the US. Same goes for dairy. They're pointing to a recent deal made with the European Union related to dairy.

19:48Katie Simpson:Like so much of what this administration does, elements of truth, but context matters. Yeah. So that's – again, that's the ostensible sort of legal justification. But to that question of why now, because obviously alcohol stuff has been going on for a year and a half, the dairy stuff has been going on forever. However, you can't ignore the fact that this is going on at this crunch time for the broader Kuzma talks. And there is an argument that this is negotiation, a negotiation tactic for the U.S. to have even more leverage in those talks to try to get concessions from Canada. You know, another thing that's kind of weird about the timing, and I don't know, maybe I'm overreacting to this, but it happened the day after the World Cup final, right?

20:40And all I can think of is that it's hard to imagine that that is a coincidence that maybe the Trump administration is like they wanted to make this move, but they didn't think the optics of doing it when they were co-hosting this gigantic soccer tournament with the eyes of the world on Canada, the US, Mexico jointly hosting it. I don't know. But, you know, day after that's done, whammo, Canada gets hit. And then I was just thinking this other thing about the real motivation. Elsewhere in that interview, Jameson Greer, who I've spoken to directly as well, he said this. The number one thing that he says Trump wants to do is reduce the U.S.

21:25trade deficit with Canada. Granted, all the stuff that Katie said about wanting to reach our jobs and have more Americans working, That's obviously part of the motivation. But Jameson Greer has said that reducing the trade deficit is a big deal. Well, what's the main reason for the U.S. trade deficit with Canada? It's the imbalance in energy, right? Canada exports a ton more crude oil and energy products to the U.S. than the U.S. exports to Canada. No tariff on crude oil, right? If you look at what is being hit with these tariffs, I don't want to minimize it, but that$28 billion figure that Katie mentioned is about 5 % of Canada's annual exports, the value of Canada's exports to the US, right?

22:19Is hitting that amount going to actually really reduce the trade deficit substantially? Or is it more about, you know, punishing Canada, getting leverage in Kuzma, trying to do all those other things that Trump wants to do for the U.S. economy?