Canada strikes back in the trade war

SPEAKER_1 (0:00)

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Kimberly Adams (0:25)

Canada strikes back in the trade war and the long-term effects of financially supporting your parents.

From Marketplace in Washington, I'm Kimberly Adams. Tariffs on about $20 billion worth of US imports to Canada are officially in effect today. They're Canada's answer to tariffs imposed by the Trump administration last month, and a sign that the renewed trade war with the United States' second largest trading partner is nowhere near an end. Marketplace's Henry Epp is here with more. Good morning, Henry.

Henry Epp (0:57)

Hey, Kimberly.

Kimberly Adams (0:58)

So this is Canada's official response to tariffs imposed by the US after trade talks broke down last month. What do these retaliatory import taxes look like?

Henry Epp (1:08)

So Canada's placing tariffs ranging from 15% to 50% on goods, including motorcycles, dairy, paper products, appliances, and smartphones. And their intention is to match American tariffs dollar for dollar. That's how Prime Minister Mark Carney has described Canada's response. The US previously put tariffs on Canadian wine, cheese, and hockey sticks, among other things. President Trump, meanwhile, lashed out yesterday at the Canadian plane manufacturer Bombardier. Trump said the company's planes shouldn't be sold in the US unless they, quote, build here. Bombardier, in a statement, noted that it employs people in more than 20 states and relies on a supply chain of about 2800 American companies.

Kimberly Adams (1:46)

Help us put all this in perspective. The US and Canada are supposedly close trading partners. So how much of that trade is actually affected by these back and forth tariffs?

Henry Epp (1:57)

Yeah, it's actually just a small fraction. The US and Canada send hundreds of billions of dollars worth of goods across the border every year. So there's a lot that these tariffs don't touch. But that also means there's room for both sides to escalate. Already, President Trump has said he will double tariffs on Canadian cars and trucks starting in January, Canada also has a lot of natural resources that the US relies on. They send us about 6 million barrels of oil per day. We also import potash fertilizer, critical minerals, and electricity from Canada. And none of those imports have come into play in this trade war yet. The danger is things could keep escalating and widen the economic damage on both sides.

Kimberly Adams (2:37)

Marketplace is Henry up. Thank you.

Henry Epp (2:39)

You're welcome.

Kimberly Adams (2:41)

Staking with Canada, I'm joined now by Jeffrey Cleveland, Chief Economist at Payden and Regal. And Jeffrey, how likely are we to see the impact of these new Canadian tariffs in US markets?

Jeffrey Cleveland (2:52)

There's a couple of ways to think about tariffs. One, I view them as a tax. So they're a tax on goods. In general, we view them as being a drag on growth.

So that's probably the first order consequence. Second to that, though, we've been dealing a lot with price pressures that the typical consumer has. So that's showing up in things like the Consumer Price Index, the Personal Consumptions Expenditures Price Index. So more inflation is an issue as well.

Kimberly Adams (3:23)

We are creeping up on $100 a barrel, again, due to the ongoing conflict in the Middle East, and gas prices were at a record high over Labor Day weekend. What do you think is ahead in terms of that dynamic?

Jeffrey Cleveland (3:37)

The uncertainty and the ongoing conflict has kept oil prices elevated. I would just say that I think this is a big issue for the average person, the facing the gas price at the pump. It's also not the entire inflation story that we are seeing. We're seeing goods price pressure that are related to tech and AI investments. We're seeing services prices.

Beyond the oil price, you think about most of what you spend your money on, our services, those also remain elevated, those prices, and that's contributing to inflation. Overall, you have a lot more inflation than we probably anticipated at the start of the year, and this is reason, I think, for the central bank to hike interest rates this fall.

Kimberly Adams (4:21)

Jeffrey Cleveland is Chief Economist at Payton and Regal. Thank you very much, Jeffrey.

Jeffrey Cleveland (4:26)

Have a good week.

SPEAKER_5 (5:02)

We'll see you next week.

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