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(Bloomberg) — The Canadian government announced a sweeping package of counter-tariffs against US-made products after President Donald Trump confirmed that his administration will go ahead with levies against Canada and Mexico on Tuesday.
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“Canada will not let this unjustified decision go unanswered,” Prime Minister Justin Trudeau said in a statement late Monday. The retaliation plan is the same as the one he announced in February after Trump signed his executive order for broad tariffs.
The first stage is 25% tariffs on about C$30 billion ($20.6 billion) worth of goods from US exporters, and will go into effect at 12:01 a.m. New York time unless the US drops its tariffs, Trudeau said. A second round of tariffs at the same rate will be placed on C$125 billion of products in three weeks — a list that will include big-ticket items like cars, trucks, steel and aluminum.
“Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said.
The retaliatory measures were expected after Trump said earlier there was no way for Canada and Mexico to avoid the broad tariffs he has been threatening since he was elected in November. It’s a trade war that will disrupt one of the world’s largest bilateral trade relationships, worth more than $900 billion in annual goods and services. Canada is the largest single buyer of US goods, and vice versa.
The Canadian dollar and stocks tumbled, with the benchmark S&P/TSX Composite Index falling 1.5%, the most since Dec. 18. Traders in overnight swaps increased bets the Bank of Canada would cut interest rates by 25 basis points at its March 12 meeting, rising to nearly 80% from about a coin flip.
Trump’s executive order, signed Feb. 1, calls for 25% tariffs against most of what the US imports from Canada and Mexico and 10% on Canadian energy products such as crude oil, natural gas and uranium.
The Bank of Canada has warned that a prolonged tariff war has the potential to chop Canadian output by nearly 3% over two years and “wipe out growth” during that period. Demand for Canadian goods in the US would suffer, exporters would cut production and jobs, prices for products imported from the US would rise, and consumers and businesses would spend less.
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