'Surprisingly big deal': Economist on Trump's new 50% Canada tariffs

Is President Trump reigniting the trade war with Canada?I guess it's been ignited.Igniting further the trade war with Canada.50 % tariffs on certain Canadian goods.Explain to people how big a deal this is.

This is surprisingly big deal, actually.And it's fitting this is part of your series on the cost of living crisis, because it just got a little bit harder for everyone.And by the way, I really do want to compliment you on the important work that you're doing there.Look, let me explain the background.The President has been batting around Canada like a cat who's just found a mouse.He's been doing it for years now.

He came to power when NAFTA was the the trade agreement that had originally been negotiated by Clinton.He tore that up.He renegotiated it.He then came to power a second time.He tore it up.He renegotiated.

In fact, one of his first acts as president was aggressive tariffs against, can you believe it, Canada.of all the countries in the world.And recently, we got into a nice piece.And in that piece, basically, the president had a bunch of silly tariffs.But overall, he said anything that was under our existing free trade agreement, I want to repeat, the United States has an existing free trade agreement with Canada.Previously, anything that was under that was exempt.

which meant that most of our trade with Canada was just continuing along nicely.What the president has done here is dramatically different.He said there's no longer an exemption for anything that was covered by our existing free trade agreement.He's literally got 14 pages of different goods that he's now imposing his 50 percent tariff on, which is a tax on Americans who buy goods from Canada.

And to kind of tie it together with what you said at the beginning, One of the things that I think I picked up on throughout the course of my reporting for the project is it's not any one thing, right?It's not one grocery item going up.It's not gas going up for a couple of weeks.It's the compounding nature of everything and the structural issues that put people close to the brink and then something like an increase on an item or a certain good or something you buy at the grocery store that kind of pushes you over the edge.the unexpected medical bill, the flat tire.One of the things that I think has been so hard to explain to people, and you do it quite well, is the kind of disconnect between the macroeconomy and the people that I've been talking to for this project, what they're facing, why people are so unhappy in all the polling.

How do you square that?

Mate, I think part of it is we are used to being able to pull together during hard times when we face a crisis and we do so together.Think about how there was in the early days of COVID tremendous social solidarity.We all wanted to help our neighbours out.We understood we were in tough times.We were there, we were in it together.The thing that's different about the present moment, and this really aggravates me, is for the first time in my lifetime, most of our economic challenges are literally coming straight from Washington.

Today's announcement, for instance, makes an array of Canadian goods much more expensive for the families that you're talking to.We have very tight linkages with Canada.It's not quite the 51st state, but they're they're our very best mates.And if we're not going to look after them, then, you know, 50 percent sales tax on top of everything that goes on there.It's not just that, of course, there's the war in Iran.And the other thing that really strikes me is, you know, inflation right now is three and a half percent.

Compared to other countries of a similar size and status compared to the G7, the United States has the highest rise in the cost of living of any of those countries right now.So what folks are feeling at home, in fact, it's real.

What exactly will be included under these new tariffs?

Yeah, it's a pretty sweeping announcement because we have all kinds of items that are going to be part of this furniture and you've got alcohol, machinery, hockey sticks.I know a lot of folks are going to be concerned about that.Now, these are 50 percent tariff.So that's significant.That's one of the highest levies that the United States has put on anycountry's goods.

What are we looking at as an overall impact?Well, these items are $20 billion worth of the goods, but they're only about 5 % of Canada's total exports to the United States.So it's a lot of stuff, but it's still 95 % are not going to be tariffed.The key thing, though, is that these are not exempt from that USMCA.Canada's avoided a lot of tariffs tariff threats because of to impose tariffs.We have not seen any president use Section 338, so this is a big test.

We'll see if Donald Trump can use this to start levying tariffs on other countries as well, Wolf.

So it's going to wind up costing Americans more for all the goods that are imported, or at least a lot of the goods imported from Canada, right?That's right.

People who pay the tariffs are the consumers in the country that's imposing them.So Americans pay the tariffs, even though they're on Canadian goods when they get imported.Ultimately, that goes to consumers.

Now, Canada has something to say about this in a statement.Canadian Prime Minister Mark Carney said, quote, This trade dispute has raised costs for families, particularly in the U .S.Canada stands ready to engage intense intensively to address outstanding issues with the U .S.to the mutual benefit of our citizens.

TheThe law Trump cites has never been applied quite like this.So, Scott, when you look at this, you have a state that gets directly affected by this almost every single time.And I do want to just quickly read what some Canadians are saying about this, if I can figure it out here.Okay.Let's get this viewer who has just gone to cnn .

com slash Abby.John MC from Canada says in part, this isn't right on any level.We are neighbors, friends, allies.Just a note for some of you, we do get nailed by these tariffs as much as you do.Our costs have skyrocketed.The second quote is very similar to that.

What do you say to them?

Well, the president today, by the way, let me acknowledge, I am from Kentucky, and the bourbon industry there has been caught up in these tariffs, and they have concerns about it.

Because Canadians have said, we're not drinking this anymore, and they've taken it off the shelves in some places.

Yeah, and the retaliations there have been pretty clear.Now, the president issued some paper today, the White House did, and you can look at it at the White House website.The areas he was really concerned about were motor vehicles, alcohol, and dairy.And I think they do make a lot of sense.a pretty compelling case that the Canadians have unfairly singled out those industries in the United States for unfair trade practices.That is the stated reason for the tariffs today.

Now, going on in the background here is also that I guess we're currently renegotiating or trying to renegotiate the USMCA, although I think we're talking to Mexico and not the Canadians at the moment.You would hope that in the outcome of all this, the Canadians would not unfairly target things in the United States like dairy and alcohol and motor vehicles.What was true remains true today.The president believes in his authority to tariff.He believes tariffs are not used enough.He believes tariffs give him economic leverage.

but also diplomatic and negotiating leverage.I assume that's part of what's going on here as well.That was his attitude before.It's his attitude today.And I have no reason to believe he's ever going to change.

Unlike some of the tariffs last year that the court invalidated, I think correctly, it's pretty clear that he has the authority.This particular tariff is a legal tariff.It's a retaliatory tariff.It is true that Canada is opposing Pretty pretty high tariffs on the United States and Trump's whole strat look.I'm a free trade guy I'd love to see Canada Mexico the United States be just one big free trade zone, but it is true that Canada is Is discriminated against American products and Trump has for better or worse and in some cases were better He has used America's leverage to force other countries like Canada to comply.The tariffs they put on American dairy products are outrageous.

And I bet, I bet, in the next three or four weeks, I'll bet you, that Canada will back down here, and that will be good for America.

The problem is that Trump acts mercurially.He doesn't really think these things throughout very long.He was just sitting around with the president of Mexico and the prime minister of Canada yesterday at the World Cup.He couldn't have a conversation with them.He decides the next day he's going to slap tariffs on Canada.It's a reflection of a president who doesn't make decisions thoughtfully.