US President Donald Trump signed an order imposing a 50% tariff on a range of Canadian goods, which is one of the steepest trade actions of his second term in the White House. The move raises fresh uncertainty for cross-border business and consumers just as the two countries, along with Mexico, were due for another round of review of the Canada-United States-Mexico Agreement (CUSMA). The US elected not to renew CUSMA for another 16-year period at the beginning of July.

• The potential new tariffs cover alcohol, hockey sticks, dairy, furniture and other goods, and could take effect in 30 days. The White House invoked Section 338 of the Tariff Act of 1930, arguing Canada discriminates against U.S. alcohol, autos and dairy.
• Canadian Prime Minister Mark Carney responded that the new tariffs violate the terms of CUSMA. However, he stopped short of threatening retaliation.
• Carney noted that Canada has offered robust proposals to resolve trade disputes with the US and to modernize CUSMA. He said that he and Trump agreed to accelerate trade talks.
• Not every Canadian leader is as measured: Ontario Premier Doug Ford said Canada should not back down.
• The dispute lands as the next formal negotiations for the review of CUSMA are set to begin. Carney’s preference for talks over retaliation keeps a successful review within reach, but each new tariff imposition makes a smooth review less certain.

While the review of CUSMA persists, these potential new tariffs add to the uncertainty for Canadians.  The larger question is whether this is a negotiating tactic within the CUSMA review or a sign talks are deteriorating. Carney’s restraint likely keeps a resolution on the table, but confidence in that outcome should stay guarded until there is real progress on the review of CUSMA.

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