Canada has taken a decisive step in the escalating trade tensions with the United States by enforcing a 50% surcharge on American steel imports that exceed a newly established import quota. This move, announced late Friday, comes as a direct response to President Donald Trump's abrupt termination of trade talks between the two nations.
Finance Minister François-Philippe Champagne stated that the new Canadian measure aims to safeguard Canada's steel industry against what he terms "unjust US tariffs." The situation has been exacerbated by a post from President Trump on Truth Social, labeling Canada as a "very difficult country to trade with," which surfaced mere hours before Canada's retaliatory announcement.
The trigger for this recent discord is Canada's digital services tax, set to be implemented on Monday, targeting large tech firms that profit from Canadian users. Trump, in a vehement post, announced the cessation of all trade discussions, citing the tax as a “direct and blatant attack on our Country.” The 3% tax, retroactive to 2022, is expected to significantly affect major American tech companies, potentially leading to a $3 billion bill for U.S. firms.
In the wake of this conflict, the impact on the U.S. steel industry, which has seen companies like U.S. Steel Corporation merge with Japan's Nippon Steel after years of decline, remains uncertain. The U.S. continues to impose a 25% tariff on Canadian imports not covered by the USMCA, with Canadian energy exports facing a 10% duty and most goods entering the U.S. since April subjected to similar tariffs.
Canada's aggressive stance indicates a willingness to consider further retaliatory measures if necessary. Officials have expressed their preparedness to "take additional steps as needed." The escalation occurs as Trump's July 9 global trade renegotiation deadline looms, urging countries to avoid "reciprocal tariffs" by that date. However, this deadline may be subject to change based on ongoing trade developments, as indicated by Trump himself and Treasury Secretary Scott Bessent.
The back-and-forth tariff imposition has had a tangible effect on both nations' industries. Since March, approximately 1,000 workers in Canada's steel industry have been laid off due to American import taxes, while the U.S. steel sector has struggled under the weight of tariffs and industry challenges.
The financial markets have already felt the ripples of these trade tensions, with bond values dropping after Trump's initial tariff announcement on what he called "Liberation Day." Although a 90-day pause on tariff enforcement was enacted starting April 9, with a potential extension to Labor Day, the uncertainty continues to cast a shadow over international trade relations.
