For the top woman of Linamar, a Canadian producer of car parts, among other things, there is no doubt: an import levy of 25 percent of the United States on Canadian goods will “force the North American car industry on its knees.” Linda Hasenfratz said that last week during a press conference in Guelph, Ontario.
Hasenfratz expressed a consensus among Canadian businessmen, economists and politicians: the economic consequences of the taxes set by US President Donald Trump on goods from neighboring countries Canada and Mexico will be drastic. “Destroying,” said Doug Ford, Prime Minister of the Province ontario, with his extensive car industry, last week.
This Saturday their fear will become reality. After weeks of threats, Trump confirmed on Friday that he sets taxes of 25 percent on importing goods from the two largest trading partners of the US. With this, Trump will shift aside $ 1,900 billion for decades for decades in North America-which was involved in 2023-without mercy.
“We really have to do this, because we have large trade shortages with these countries,” Trump said in the White House on Thursday. “These taxes may go up over time.” For oil and gas, charges will take effect around 18 February, possibly at a lower level. A levying of 10 percent is established on Chinese imports.
According to economists, Trumps first cannon shot in a trade war with neighboring countries can stir up inflation, disrupt jobs and disrupt various crucial sectors in North America, including energy, wood, agriculture and the automotive industry. By one research From the Peterson Institute for International Economics, a think tank in Washington, the taxes will “harm all the countries involved, including the US.”
Moker
Especially for Canada and Mexico, an economic smoker threat. Trade with the US is the cornerstone of the economy for both countries. For example, Canada supplies 78 percent of its exports to the Zuiderburen. In 2023 it was about $ 418 billion. The country is the largest buyer of American imports, worth 354 billion in 2023. If services are included, their total trade was 923 billion.
The taxes in Canada, the ninth economy in the world, are expected to cause a recession. Economic growth may be 2 to 2.5 percentage points lower this year. Unemployment can rise from 6.7 percent to 7.5 to 8 percent. A million jobs are at risk. The Canadian dollar will fall further, making imports more expensive. “The consequences will be fierce,” says Carlo Dade, economist at the Canada West Foundation, a think tank in Calgary, by telephone.
But the US will also suffer pain. Contrary to what Trump suggests, the taxes are not paid by neighboring countries, but by American importers. They pass on higher prices to their customers, which will lead to inflation. Trump promised during the election campaign to combat it. “The irony is that they shoot themselves in the foot by having American companies pay more for Canadian components of their products,” Thus economist Jim Stanford against Omroep CBC .
‘Dumbest Trade War in History’
The American newspaper The Wall Street Journal For that reason speaks A commentary of “the stupidest trade war in history”. Trumps economic attack on “those notorious American opponents … Mexico and Canada,” writes the newspaper mockingly, “doesn’t make sense.”
Why does Trump continue? His reasons have been varying for weeks. Initially, he threatened with taxes if neighboring countries would no longer do to combat the inflow of migrants and drugs like Fentanyl to the US. Later on, trade bangs were added – especially shortages on the trade balance. A proposed revision of the North American free trade agreement can also play a role in USMCA. That Convention, the successor of the NAFTA agreement from 1994, was concluded during Trumps first term and would be reegued in 2026.
The first motivation led to astonishment in Canada: less than 1 percent of illegal immigrants and Fentanyl in the US arrived through the northern border last year. The government of Prime Minister Justin Trudeau nevertheless promised a package of measures worth 1.3 billion Canadian dollars (around 864 million euros) in December to strengthen the monitoring of those thousands of kilometers long.
‘Enrich citizens’
Since his sworn, Trump also focuses his arrows directly on the American trade relationship with the northern neighbors. He states that the US Canada ‘subsidizing’ for $ 200 to $ 250 billion a year, an unfounded figure that refers to an American shortage of trade balance with Canada. As he said in his inauguration section, he wants to “tax other countries and impose rates in order to enrich our citizens.”
In reality, the American trade relationship with Canada is one of the most balanced who have the US. The trade deficit in 2023 was 64 billion dollars, mainly as a result of Canadian oil supplies. If energy is not taken into account, the Americans have a trade surplus. Canada emphasizes that both countries have interest in their narrow economic ties. According to Trudeau, who has announced that Canada will take “powerful but reasonable” countermeasures, the taxes have “disastrous consequences,” also for the US.
It leaves Trump cold. “We don’t need them to make our cars,” said Trump Last week about Canada during a video speech at the World Economic Forum in Davos, referring to the integrated car industry. “We don’t need their wood because we have our own forests. We don’t need their oil and gas, because we have more of that than anyone. “
Economists dispute that. Canada is the largest foreign supplier of energy to the US. In 2023, the US used more than 20 million barrels of oil per day and produced nearly 13 million. The rest was introduced, for more than half from Canada. In 2023, Canada supplied 165 billion dollars in oil, especially from the tar sands of Alberta – a heavy crude oil that is suitable for several American refineries. The shale oil that tapping the US itself cannot simply replace that supply.
Moreover, Canada houses a considerable part of the integrated North American car industry. Since the so -called ‘Autopact’ from 1965, cars and parts of the border are produced in collaboration on both sides. Parts, semi -finished products and end products sometimes cross the border up to eight times.
Enormous investments
Howard Lutnick, Trumps intended Minister of Trade, said on Wednesday in the senate That he wants car factories in Canada and Mexico to ‘return’ to the US. That would require capital investments of dozens of billions of dollars from the car producers. And that would increase the price of vehicles.
Linda Hasenfratz, top woman of the parts producer Linamar, does not think that the automakers are like that. They will oppose the import duties, she predicts. “This arrives at the car manufacturers. They are those who have to cough these costs. They can’t afford that. ”
In addition, Canada is a crucial supplier of steel and aluminum, as well as raw materials, including uranium and nickel. It is also the most important source of ‘Potash’ (potassium -containing minerals), an indispensable component of fertilizer that American farmers need for food production, and critical minerals such as Germanium. Moreover, Canada delivers billions of dollars for construction for construction.
Why does Trump start a trade conflict with a loyal ally and the largest buyer of American goods? According to economist Dade, he wants to make Canada an example for larger opponents. Dade refers to the Chinese saying ‘killing the chicken to scare the monkey’. “Trump is willing to set up import duties against us, even though the US economy causes damage. If he comes to the next country, he has already shown that he is willing to collect pain. “
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