Fighting Back in the US Trade War

March 5, 2025 – The first wave of tariffs imposed by President Trump on Canadian imports is an unmistakable attack on Canada’s economy and workforce, according to a new C.D. Howe Institute report.

A special communiqué, “Bolstering Canada’s Response to US Trade Threats,” draws on insights from the Institute’s Trade Crisis Working Group, which met on February 14 and again on March 5, 2025. While some tariffs may be suspended in vulnerable sectors, the initial 10 percent tariff on energy products and 25 percent on other goods has already impeded trade beneficial to businesses and consumers on both sides of the border.

These and other tariffs Mr. Trump has announced or telegraphed are based on questionable logic or spurious facts. They also run counter to the commitments made by the first Trump Administration under CUSMA/USMCA, while the “reciprocal tariffs” policy poses a diffuse and insidious threat to the world trading system and will likely be an administrative nightmare.

Some members of the group noted, however, that these measures may be intended to pressure Canada into a “new economic deal” ahead of the 2026 CUSMA/USMCA review or even align with broader objectives to absorb Canada politically.

In that context, the Working Group supported expanded communications about the benefits of the Canada-US trade relationship, aimed at the Achilles’ heel of the US position: the costs of tariffs on Canadian products for US producers and consumers, given that Canada is a significant supplier of industrial materials and parts to the United States. The group highlighted that the United States, unlike its other major trading partners, runs an overall manufacturing trade surplus with Canada – a little-known fact that illustrates the direct contribution of the trading relationship with Canada to US manufacturing jobs.

Participants acknowledged that Canada’s retaliatory tariffs and other measures — including procurement reviews, liquor store bans, and ferry fees — could risk harming Canadians and are unlikely to prevent future attacks on their own. However,  members generally supported a calibrated approach to retaliation that minimizes domestic harm while signaling resolve.

More broadly, the working group urged policymakers to de-risk Canada’s heavy reliance on the US market by strengthening Canada’s east–west economic ties, suggesting ways to accelerate strategic infrastructure projects, remove interprovincial trade barriers, and implementing support measures such as work-sharing programs to help businesses manage immediate disruptions.

The Trade Crisis Working Group will meet again to assess ongoing developments and explore ways Canada can protect its interests. The working group consists of experts drawn from the C.D. Howe Institute’s International Economic Policy Council, Supply Chain Working Group, and 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.