By Don Newman

December 6, 2024

While Santa is busy making his naughty and nice list, Justin Trudeau should be compiling one of his own – the list of US exports headed for Canada that will be hit with retaliatory tariffs if Donald Trump delivers on the first tariff threat of his second administration.

That is what the Canadian Government should be doing as we prepare to face-off with Trump over the outrageous threat the President-elect has made to impose 25% tariffs on all Canadian exports to the United States on January 20^th, the day he is sworn into office.

The Canadian list – which surely already exists in draft form and, indeed, may have existed for some weeks – would be composed of the American exports to Canada upon which we will impose counter-tariffs if Donald Trump goes ahead with his destructive plan, which violates the provisions of CUSMA and would likely launch legal challenges by both Canada and Mexico.

The first time he was elected, Trump campaigned against NAFTA as “the worst trade deal ever made” by the United States. After exhaustive negotiations, he signed CUSMA in October 2018, and proclaimed it the most “perfect” trade agreement America had signed. There are key differences between NAFTA and CUSMA, including the existential CUSMA clause that provides for a review and possible renegotiation as of July, 2026.

Trump, however, cannot wait until 2026. Eager to show he is accomplishing something as soon as he takes command, he is willing to crash through the barriers of a trade deal he signed to throw his weight around against his two less powerful North American neighbours. The tariffs on Canada and Mexico can only be escaped if both countries immediately clamp down on illegal immigrants crossing their borders into the United States and the smuggling of illegal drugs, notably fentanyl, is dried up. Canada’s contribution to both those problems is relatively slight, and certainly not worthy of a trade war.

So far, the Canadian response to the threat has been to warn the incoming administration that tariffs on Canadian exports would only hurt Americans by raising prices in the United States. That was approach taken by Prime Minister Justin Trudeau when he had dinner with Trump at Mar-a-Lago last week. That is a good approach, but it is just one and arguably not the best one.

More effective would be the threat of retaliation, which is where the list comes in. Canada is the major export market for 36 of the 50 United States. Together in 2023, those exports to Canada totalled $352.76 billion American dollars. Because of the size of the U.S. economy, Canada represents only 17% of total American exports. But in the 36 states where Canada is the largest export market, we have significant leverage. Which is why, where possible, the list should feature industries and companies in some of those states. Michigan, Illinois, and New York could be prime targets.

In 2018, after Trump imposed tactical tariffs on steel and aluminium as leverage in the CUSMA negotiations, the Trudeau government compiled a list of retaliatory tariffs that was not just calibrated for impact on certain states and industries, but for impact on key politicians whose careers relied on those industries in their home states. They included tariffs on bourbon from Republican Senate Leader Mitch McConnell’s home state of Kentucky, and on yogurt from Wisconsin, home of then-House Speaker Paul Ryan. It worked.

There is no reason why this approach can’t work this time. Relying on ties of friendship, a mutual history together and future collaborations is fine. But money talks too. And it often talks louder than anything else, especially in US politics. That is why it is time for Ottawa to draw up a list.

Contributing Writer and columnist Don Newman, an Officer of the Order of Canada and lifetime member of the Parliamentary Press Gallery, is Executive Vice President of Rubicon Strategy, based in Ottawa.