Trump raises tensions with Canada by announcing new 50% tariffs

Geoff Bennett:

The Trump administration is imposing a new round of tariffs on Canada, accusing the country of unfairly discriminating against American autos, dairy products, and alcohol. The 50 percent tariffs would cover some $20 billion worth of Canadian imports on goods ranging from cement to hockey sticks. They're set to take effect in 30 days.

In the Oval Office today, President Trump defended the move.

President Donald Trump:

Canada has been very, very tough on us over the years, for many years, and no other president's done anything about it.

I love Canada. I love the people of Canada. Many friends that live in Canada. But their leadership from Trudeau to the current leadership, I mean, in all fairness to them, they need us to survive. Without us, there's no way they can survive.

Geoff Bennett:

Canadian Prime Minister Mark Carney pledged to intensify talks with the U.S. in the coming weeks in hopes of reaching a deal.

We're joined now by Natasha Sarin, co-founder of the Yale Budget Lab.

Welcome back to the program.

Natasha Sarin, President, Budget Lab at Yale University: Thanks for having me.

Geoff Bennett:

So how significant would these tariffs be, these 50 percent tariffs be, if they take effect in 30 days, not just for Canada, but for U.S. businesses and consumers?

Natasha Sarin:

Yes, the important thing to understand about these tariffs, to put them in some context, is, they cover about 5 percent of imports from Canada. And so they're hugely important to the particular product lines that we're talking about here.

My colleagues at the Budget Lab estimate that's about 550 of them, things like dairy, alcohol, hockey sticks, as you mentioned. But in the aggregate picture of our trading relationship with Canada, this is one particular sliver.

It would drive up the effective tariff rate with Canada quite significantly, in part because the tariffs are being levied at such a high rate. You're talking about on a narrow base of products a 50 percent tariff. That is very consequential, but it's not covering the swathe of everything that we're importing from Canada.

Geoff Bennett:

So this high tariff rate on a narrow base of products, is there reason to believe that these tariffs never take effect, that this is all just designed to negotiate a deal?

Natasha Sarin:

It's -- the effective tariff rate, in the U.S. has changed some 60-plus times in the second Trump administration, and that's just counting tariffs that actually went into effect, not the fact that there -- we have seen a lot of announcements about future activities with respect to our trading partners that were ultimately rolled back or changed in the process of negotiating.

And so, obviously, this is a very active and live conversation. Obviously, the administration was very clear about giving themselves a delay of 30 days with respect to the implementation of these tariffs in order to continue talks with Canada.

But I think, in some sense, one shouldn't take comfort in the fact that you might not actually see tariffs at this level on these swathe of products implemented, because the volatility of the trading environment, the fact that if you are someone who is importing some of these goods from Canada, you have no idea essentially what the trading environment is under which you're going to be bringing goods into this country in just a few weeks, makes it really, really challenging to try and run businesses and really, really difficult from the perspective of the American consumer, who is seeing as a result of this volatility an increase in the prices that they're paying.

Geoff Bennett:

When the administration says that Canada has unfairly discriminated against American products, that's the argument they're making, how strong is that case?

Natasha Sarin:

One thing that I think it's really important to sort of clarify a bit is the timing of the alleged inappropriate practices on behalf of Canada with respect to our products.

A lot of what is happening in this context is, there's frustration in the United States or amongst some administration officials that Canada has actually retaliated to increased tariffs by us on Canadian imports over the course of the last year-and-a-half.

And so a lot of the practices you're talking about, particularly in sectors like alcohol, they are about retaliatory measures that were taken once the United States undertook this trade war. And so it seems a little sort of hard to make the argument that we're -- as a result of the fact that there have been prior tariffs that we have levied against them that have prompted these retaliatory actions, you're then going to see another swathe of tariffs instituted.

And that makes it challenging because it's kind of like a never-ending cycle with respect to escalation in ways that make it difficult to see what the path forward actually is.

Geoff Bennett:

Challenging and confusing, to be sure.

There are viewers who will watch this conversation, and they might wonder, didn't the U.S. Supreme Court strike down the Trump administration's tariff regime? And they would be right. So what's the...

Natasha Sarin:

They would.

Geoff Bennett:

Yes. So what's the legal authority that the administration is using for this?

Natasha Sarin:

That's such a good question.

And the way I have been describing the nature of the administration's actions in the aftermath of the Supreme Court decision in February is that they're certainly in keeping with the text of the ruling since the case was about one particular authority, the International Emergency Economic Powers Act, that the administration was using to impose these broad-based tariffs.

But they're not in keeping with kind of the spirit of that ruling, which made clear that the power to tax and impose these types of wide-ranging tariffs on allies and adversaries alike is a power that rests with Congress, and Congress alone.

And so, ultimately, we are going to see these new authorities that the administration is deploying to kind of patchwork together its old trading practices, we are going to see those legally challenged. And a bunch of those cases are already making their way up to the Supreme Court.

And, ultimately, it'll be for the court to rule and decide whether or not that type of broad-based power exists from these other laws. But I speculate that their answer is unlikely to be yes, given that this set of authorities sits with Congress.

Geoff Bennett:

Natasha Sarin, co-founder of the Yale Budget Lab, always good to speak with you. Thanks.

Natasha Sarin:

Thanks so much.