What smart people say about Trump’s escalating trade war with Canada

The US and Canada broke off negotiations on a new trade deal. Trump is retaliating on Monday with fresh tariffs. Getty Images/Business Insider Trump threatened a fresh batch of tariffs on Canada after talks fell apart on Friday. The new tariffs could impact cars, car parts, and steel. They're set to take effect on January 1. BI compiled what experts are saying about the new trade war. Big Canadian tariffs are making a comeback. In Truth Social posts on Monday, President Donald Trump threatened a plan to impose another batch of 50% tariffs on Canadian-made products. This one impacts cars, trucks, auto parts, and steel, and would start on January 1. The ultimatum is escalating an already bitter trade fight with one of America's closest economic partners. "Canada has been ripping off the United States of America for years," he wrote. "Canada will be treated like a State no longer!" The post came after US-Canada negotiations collapsed Friday, triggering a separate set of 50% US tariffs on roughly $20 billion in Canadian goods. Canadian Prime Minister Mark Carney has vowed to retaliate "dollar-for-dollar," beginning September 8. The countries have been trying to ease tariffs and disputes ahead of the scheduled review of the USMCA, the North American trade pact negotiated by Trump in his first term. That deal replaced NAFTA. Stakes are particularly high for US automakers. Supply chains in the US and Canada are highly interconnected, and vehicle parts typically cross the border multiple times before a finalized vehicle hits American dealerships. Here's what smart people are saying about the impact of the fresh tariff threats: Paul Krugman, Nobel-winning economist Krugman compared the Canadian trade impasse with the US's war in Iran. Horacio Villalobos# Paul Krugman, the Nobel laureate economist and former New York Times columnist, wrote in a Substack post Monday that he still has to "rub my eyes at the idea of Canada as an enemy." He called Trump a "bully." Krugman said Canada begins the fight at a clear disadvantage: The US economy is roughly 12 times larger, and the US buys about three-quarters of Canadian exports. Still, he argued that a trade war could inflict serious pain on the US because it depends on some imports from Canada. He pointed to specialized Canadian lumber, heavy crude oil used by Midwestern refineries, and hydropower that is an important part of the electricity supply in New York and New England. He also said disrupting cross-border auto and auto-parts trade would be "immensely disruptive" to the industry on both sides of the border. "The bottom line is that Trump is going to lose his trade war with Canada as thoroughly as he has lost his shooting war with Iran," he wrote. David Whiston, auto industry senior analyst at Morningstar The Canadian Oakville plant is expected to start building some Ford pickup trucks, the most profitable part of the automaker's consumer lineup. Pawel Dwulit/Toronto Star via Getty Images David Whiston, an auto analyst at Morningstar, said the biggest assembly exposure for Ford and GM is in pickup trucks. That's the most profitable part of each car company's US business. GM builds some Chevrolet Silverados in Canada, he said, while Ford is set to bring 100,000 units of annual Super Duty pickup capacity online at its Oakville plant in the fourth quarter. "The math on that just got a lot worse for them," Whiston told Business Insider. Michael Froman, president of the Council on Foreign Relations Froman said that the new tariffs are "not economically meaningful." In an interview on CNBC, Michael Froman, the president of the Council on Foreign Relations and a former US Trade Representative, said the 50% tariff package that took effect over the weekend affects only about 5% of Canadian exports to the US. "It's significant in terms of what it says about the state of the relationship right now," he said. "But, economically, it is not terribly meaningful." Froman said the average tariff applied to Canadian goods has climbed to about 6%, from roughly 1% at the start of Trump's second term — though it remains below the tariffs facing imports from China. The bigger risk, he said, is to the USMCA. "The US is engaged with Mexico in a series of negotiations, but is not yet really engaged with Canada," he said. Peter Schiff, chief economist at Euro Pacific Asset Management Peter Schiff wrote on X that the tariffs will make the cost of living a bigger problem. SALT Peter Schiff, a stockbroker and frequent Trump critic, wrote on X that the tariffs would hit American consumers, not just Canadian producers. "Americans purchase a lot of those goods from Canada, and those goods will now be vastly more expensive for Americans to buy," he wrote, adding that the plan would worsen "the government-created cost of living crisis." Kelly Ann Shaw, partner at Akin Kelly Ann Shaw, a partner at Akin and former deputy assistant to the president for international economics in Trump's first term, said she sees no near-term resolution to the dispute. During an interview on CNBC, Shaw said Carney's Saturday address, in which he promised dollar-for-dollar retaliation, came across as a "victory lap" to people in the Trump administration. "There's a lot of frustration and bitter feelings on the US side," she said. "I don't really see an off-ramp anytime soon. I think Canada is going to continue to be out in the wilderness from a US negotiating perspective for a little bit now." Trevor Tombe, professor of economics at the University of Calgary Trevor Tombe, an economist at the University of Calgary, wrote that the fresh tariffs likely won't have a massive, immediate impact on Canada's national economy. He estimated that the new import plan would raise the average tariff rate on Canadian exports by about 2.5 percentage points and shave a couple of tenths of a point off GDP growth. That doesn't mean the effects will be evenly felt, he argued. Tombe estimated that the tariffs could put roughly 87,000 Canadian jobs at risk if they remain in place, and affected sales fall in line with the 50% duties. And some of those jobs would be in places that aren't directly targeted: He estimated that Alberta could lose about 9,000 jobs even though relatively little of the province's exports are directly affected. 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