Canada fights tariffs with tariffs

Darian Woods (0:01)

Well, and I'm so proud of myself. I just won the top prize at Ring Toss.

Paul Haavardsrud (0:06)

Oh, is that why you're holding this giant teddy bear, Darien?

Darian Woods (0:08)

No, I just brought this one from home, but what I did win was a subscription to the Indicator newsletter.

Paul Haavardsrud (0:13)

Oh, congratulations, that's very exciting.

Darian Woods (0:15)

You can sign up too at npr.org/indicatornewsletter.

Adrian Ma (0:27)

This is The Indicator from Planet Money, I'm Adrian Ma.

The trade war between the US and Canada is entering a new phase. Back in August, President Trump slapped 50% tariffs on a range of Canadian goods, and now Canada, one of our closest trading partners, is fighting back. Today, counter tariffs, ranging from 15 to 50%, kick in on imports from the United States. And that will affect everything from steel to dairy products to electronics.

And so we felt like this was an appropriate time to check in with a friend of the show, Paul Haavardsrud. He hosts a podcast called Cost of Living, which is a show about money and economics from the CBC. And the CBC, for those who don't know, is the Canadian Broadcasting Corporation, sort of like a NPR cousin to the North. So I guess in a way, Paul, we're practically related.

Paul Haavardsrud (1:17)

We absolutely are. We keep talking, though, in like not happy family reunions. It's always, it's always...

Adrian Ma (1:23)

Hopefully, we're not in like a family feud of some kind. Like, are we cool?

Paul Haavardsrud (1:27)

Oh, CBC and NPR are great, and you and I, Adrian, are super cool.

Adrian Ma (1:33)

After the break, Paul is going to help us understand how Canadians are thinking and feeling about this situation and tell us how Canada's trade war strategy is just starting to take shape.

So, Paul, the last time that we spoke, it was January 2025 There were hardly any tariffs between our countries. And now we're looking at US tariffs on more than $20 billion of Canadian goods, including dairy, alcoholic beverages, cement, even hockey sticks. And in response, Canada has, as of this recording, put on roughly $20 billion in tariffs on American goods. And so I'm wondering, when it comes to US tariffs on Canadian goods, which ones are Canadians most concerned about?

Paul Haavardsrud (2:18)

Well, the most unnerved is what's happening with autos. Because really, when you look at what we call KUSMA, what you call the USMCA, used to be NAFTA, our free trade deal, really at the heart, it's an auto pact. We've had an auto pact since 1965 Both sides have agreed on it. It's done good things for our auto industries on both sides of the border, our auto workers. And it really seems like what the US is coming after or what the Trump White House is coming after is our auto sector.

Adrian Ma (2:47)

When you say Canada's auto sector, what kinds of things are they making there?

Paul Haavardsrud (2:50)

Well, we make cars and trucks here. Like we make the Chevy Silverado. We make some other medium and heavy duty trucks. We have a big parts sector. And yeah, all of that is being hit and adding incremental costs to the price of cars.

Adrian Ma (3:05)

So with these tariff threats coming from the US., Canada has responded. What's Canada's overall strategy with their counter tariffs?

Paul Haavardsrud (3:15)

It's kind of simple. It's just we have to stand up to the bully, essentially. Like Canada doesn't want these counter tariffs. They're going to make the stuff we buy more expensive.

But nationally, again, we're also willing to accept it. We're willing to accept economic pain, higher prices, because what's the choice, Adrian? We just roll over, and then the bully keeps coming back for more.

So then strategically, if we zoom in on like, what is our strategy? What are we targeting? Well, we're going after stuff in swing states, like Ohio, like Pennsylvania, some other border states. And the hope here is that the counter-tariffs will put some political pressure on the White House ahead of the midterms. About 80 percent of our counter-tariffs are for industrial inputs, so stuff that's not super sexy, steel, aluminum, the rest are for consumer goods. And if you look at the US, you have what? A $30 trillion economy, so 20 bill on that is less than 1 percent. The reality is most Americans are not going to notice these counter-tariffs. But strategically, Adrian, Canada is looking to cut narrow but deep with these.

Adrian Ma (4:18)

I mean, I understand bourbon is also a flash point in this round of trade dispute. Is that right?