Trump tariffs heap up as Canada tries to curb US reliance

• The latest 50 per cent tariffs came into force after days of negotiations failed to produce an agreement.
• Canadian Prime Minister Mark Carney is diversifying Canada’s trade by boosting exports outside the United States.
• Canada is focusing on domestic trade improvements and major infrastructure projects, investing billions to reduce reliance on the US and stimulate growth despite tariff challenges.

MONTREAL – US President Donald Trump’s 50 per cent tariffs on certain Canadian goods that took effect on Aug 22 delivered another blow to bilateral trade, renewing focus on Ottawa’s efforts to reduce dependence on its southern neighbour.

Canadian Prime Minister Mark Carney’s strategy involves a search for new markets, a focus on domestic trade and the launch of major projects.

The two economies are heavily inter-connected, with roughly 70 per cent of all Canadian exports heading to the United States.

Previous Trump levies on autos, steel, aluminium and lumber have hit Canada hard, forcing job losses and stunting growth.

Canada has even entered a technical recession in 2026 after two consecutive quarters of economic contraction.

The latest 50 per cent tariffs came into force after days of negotiations failed to produce an agreement.

They impact some US$20 billion (S$25 billion) worth of goods, or 5.5 per cent of Canadian exports to the US, targeting products ranging from hockey sticks to cement.

Carney said on Aug 21 that Canada would match the US tariffs “dollar for dollar to protect our workers and businesses”.

The exports affected by the US tariffs include products that were previously protected under the North American trade pact, the United States-Mexico-Canada Agreement (USMCA).

At first glance, “that’s frightening”, said Richard Ouellet, a professor of international economic law at Quebec’s Laval University.

“Until now, the USMCA acted as kind of a shield. The Americans are opening a breach,” he said.

Trump declined to renew the USMCA on July 1, making it subject to annual reviews.

While Trump ditching USMCA exemptions could forecast more extreme measures to come, Canada’s largest bank, RBC, predicted the first package of 50 per cent tariffs would not “significantly change broader Canadian growth”.

“That’s because the new tariffs, while significant, will still impact a small segment of total trade,” RBC said in July, adding that around 80 per cent of Canadian goods would still enter the US tariff-free.

‘Diversification’

Since taking office in March 2025, Carney has focused on diversifying economic partnerships to reduce Canada’s reliance on the US market.

“Canada has what the world wants,” Carney said in a statement following the breakdown of negotiations with Washington.

“We will not allow any nation to determine our future,” he said.

The prime minister has headed to China, India and Saudi Arabia and made several stops in Europe seeking deals to expand Canada’s economic relationships overseas.

In January, he signed a preliminary agreement with China, providing for the import of electric vehicles to Canada.

Relations with Europe have also been strengthened. In July, Canada selected the German firm TKMS to build its new fleet of submarines.

In July, Canada’s central bank said the economy was “showing signs of improving”, noting that some businesses were adjusting to US protectionism, including by finding new customers abroad.

A report from Canada’s international trade minister also said that in 2025 the value of exports to non-US markets jumped by 11 per cent, hitting 33 per cent at one point, the highest level in more than four decades.

Domestic revitalisation

Another factor that could help cushion the impact of Trump’s tariffs is a renewed focus on domestic trade.

One of Carney’s first major initiatives as prime minister was federal legislation to reduce interprovincial trade barriers.

Provinces have shown reluctance to lift their own restrictions, but Ouellet said that overall “the Canadian market has been reinvigorated and there is more domestic trade”.

Carney has also tried to jumpstart domestic economic activity through his Major Projects Office, set up to reduce bureaucratic delays and grant quicker approval for select large-scale infrastructure initiatives.

Carney has promised port expansion in Montreal and Vancouver and new mines to exploit critical minerals, as well as backing plans for an oil pipeline from Alberta to the Pacific.

Overall, Ottawa has unveiled plans to spend C$115 billion (S$107 billion) on infrastructure and an unprecedented C$82 billion on defence over the coming years. AFP