Brace for Impact: How Canada Should Fight Back Against Trump Tariffs

February 4, 2025 – The tariffs announced on February 1 by The White House on Canadian exports to the United States threaten to severely harm Canadian industries and the broader economy, even as their implementation is on pause, according to a new C.D. Howe Institute report.

A special communiqué, “‘Canada First’ – Dealing with the US Tariff Threat,” draws together insights from the Institute’s new Trade Crisis Working Group, which convened on January 28 and 29. The group examined the evolving Canada-US trade relationship, President Trump’s trade policy, retaliatory measures, Canada’s leverage in any negotiation, and the possibility of a “win-win” negotiated outcome.

At its inaugural meeting, the group observed that the Trump administration views tariffs as a way to raise revenues, address large US trade deficits, counter unfair foreign trade practices, and generally compel trading partners to align with US policies on issues such as international security, illegal immigration, and drug trafficking.

Members emphasized the need for Canada to address perceived border security concerns, particularly illegal migration and drug flows, which The White House has cited as one reason for imposing tariffs. They support Canada making active, visible efforts to curb these flows both to avert the tariffs and because it is in Canada’s own best interest to do so.

Retaliatory measures which had been announced by Canada and were to be implemented in stages, are now also paused. Members urged continued caution in this area, suggesting that any Canadian response to tariffs should be carefully targeted and not undermine Canada’s own competitiveness. For example, a “dollar-for-dollar” retaliation approach could lead to costs far out of proportion to their benefits.

The group stressed that Canada’s oil and gas exports constitute a critical advantage in discussions with US policymakers but called for prudence in considering any forced export restrictions, given the potential negative implications for both countries.

Participants further highlighted the importance of proactive engagement with the US Congress – which holds ultimate sway over the continuation of any tariffs – and with the American public, who will also be negatively affected by higher prices on Canadian goods.

Communication strategies, they advised, should avoid arguments about the validity of US claims and instead focus on solutions that would benefit both countries. They also cautioned Canadian governments against prematurely proposing large-scale fiscal support or outlining specific retaliation plans in public so as not to signal panic or reveal negotiating positions in advance.

Several working group members noted additional pathways for productive dialogue, including stronger cooperation on money laundering, Arctic security, and investments in the Canadian military that could help create a framework of mutual trust. Given that challenging the economic logic of the tariffs directly is unlikely to succeed, they suggested that Canada should focus on demonstrating its role as a reliable and integral contributor to US industrial strength, job creation, and economic security.

The Trade Crisis Working Group will reconvene in mid-February to assess further developments. The working group consists of experts drawn from the C.D. Howe Institute’s International Economic Policy Council and Supply Chain Working Group, as well as other relevant experts.

Read the Full Report

For more information, contact: Daniel Schwanen, Senior Vice-President, C.D. Howe Institute; Percy Sherwood, Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.