Donald Trump threatens to impose tariffs of 25% on Canadian products imported by the United States. We answer five questions that help us better understand why the ambition of the American president is so worrying in Canada.
What exactly did Donald Trump say?
The American president indicated that he would impose new customs tariffs of 25% on all products from Canada, China and Mexico. The measure would be put in place on the day of his inauguration, i.e. January 20, 2025.
What are customs tariffs?
Tariffs, also called customs duties, are taxes levied by governments on goods that come from other countries.
They are collected like taxes. The cost is therefore proportional to the value of the import. Thus, a car worth $45,000 subject to a 25% customs duty would be hit with a tax of $11,250.
The tax is paid by the company that imports the goods, not the foreign company that exports them.
American companies that would like to import Canadian products would have to pay this tax to the American government to be able to do so.
Why does Donald Trump want to impose these tariffs?
Donald Trump said the measure would aim to end an “invasion” of drugs and migrants in the United States.
“These tariffs will remain in effect until drugs, especially Fentanyl, and all illegal aliens stop invading our country! Mexico and Canada have the absolute right and power to easily resolve this long-simmering problem. We hereby demand that they use this power, and until they do, it is time for them to pay a very heavy price!” he wrote in a message posted on his social network, Truth Social.
But that’s not all.
Tariffs are a source of revenue for the US government. Donald Trump could thus use it to finance other projects, such as deporting undocumented migrants.
Increasing customs tariffs would also be a way to protect the local American economy, a promise that Donald Trump hammered home during the election campaign.
The objective is in particular to increase the prices of certain Canadian products in the hope that businesses and citizens of the United States will turn to locally manufactured products.
Economists, however, have indicated that Donald Trump’s plan is expected to increase the prices of many everyday products, which will have direct consequences on the wallets of American consumers.
What consequences for Quebecers?
Even if the increase announced by Donald Trump is still not in effect, its impacts are already starting to be felt in Quebec.
During the night from Monday to Tuesday, the Canadian dollar experienced a significant drop, underlined market strategist Simon Brière in an interview on the LCN show Le Québec le matin.
“The US dollar is much stronger today. With the increase in prices, everything in the United States is worth more (…) The exchange rate is devalued, so vacations in Florida this year may cost more, he said , Tuesday morning. It’s going to take $140 Canadian to get $100 American.”
The wealth management advisor at Manulife, Francis Gingras-Roy, also indicates that some investors may have to modify their retirement plan.
“These tariffs risk disrupting the retirement planning of millions of Canadians by increasing the cost of living, reducing the purchasing power of savings and destabilizing investment portfolios that rely on cross-border trade” , he warns.
What consequences for local businesses?
In the first third of the year 2024, Quebec exports to the United States amounted to $21.2 billion, or nearly 75% of the province’s total international exports, according to the Institute of Statistics. of Quebec.
If the explosion of customs tariffs imposed by the United States materializes, as Donald Trump promises, the consequences could be catastrophic for several businesses here, which would have difficulty exporting their products south of the border.
Some small businesses may find it difficult to survive in this environment, while others may be forced to scale back their operations.
Tuesday, François Legeault affirmed that the increase in prices could cause the loss of “tens of thousands of jobs” in the province.
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The aeronautics, aluminum, forestry and consumer goods industries are particularly vulnerable, according to a report published by Desjardins on November 21.
