US President Donald Trump said on Sunday that Americans could feel “some pain” from the emerging trade war triggered by his tariffs against Canada, Mexico and China, and claimed Canada would “cease to exist” without its trade surplus with the US.
“Canadians are perplexed,” the country’s US ambassador said. “We view ourselves as your neighbour, your closest friend, your ally.”
The trade penalties that Mr Trump signed on Saturday at his Florida resort caused a mix of panic, anger and uncertainty, and threatened to rupture a decades-old partnership on trade in North America while further straining relations with China.
But by following through on a campaign pledge, Mr Trump may have simultaneously broken his promise to voters in last year’s election that his administration could quickly reduce inflation.
“Will there be some pain? Yes, maybe (and maybe not!),” Mr Trump said in a social media post.
“But we will make America great again, and it will all be worth the price that must be paid.”
His administration has not said how high that price could be, or what improvements would need to be seen in stopping illegal immigration and the smuggling of fentanyl, to merit the removal of the tariffs that Mr Trump imposed under the legal justification of an economic emergency.
The tariffs will begin from Tuesday.
In his Truth Social post, Mr Trump took particular aim at Canada, which responded with retaliatory measures.
He is placing a 25% tariff on Canadian goods, with a 10% tax on oil, natural gas and electricity.
Canada is imposing 25% tariffs on more than 155 billion dollars (£125 billion) of US products, including alcohol and fruit.
Mr Trump railed against Canada’s trade surplus with the US: “We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use.”
Despite Mr Trump’s claim that the US does not need Canada, one quarter of the oil that it consumes per day is from its ally to the north.
Mr Trump contended that without that surplus: “Canada ceases to exist as a viable Country. Harsh but true! Therefore, Canada should become our Cherished 51st State.
“Much lower taxes, and far better military protection for the people of Canada – and no tariffs!”
Canada’s ambassador to Washington, Kirsten Hillman, has said the US had a 75 billion dollar (£60.4 billion) trade deficit with Canada last year, but noted that one third of what Canada sells into the US is energy exports and that there is a deficit when oil prices are high.
About 60% of US crude oil imports are from Canada.
Canadian Prime Minister Justin Trudeau is encouraging Canadians to buy more Canadian goods, and says Mr Trump’s moves will only cause pain across North America.
More than 75% of Canada’s exports go to the US.
Canadians “just don’t understand where this is coming from, and probably there’s a little bit of hurt, right?” Ms Hillman said on Sunday.
“It is going to have real consequences for people, for workers on both sides of our border,” Mr Trudeau said Saturday.
“We don’t want to be here. We didn’t ask for this but we will not back down in standing up both for Canadians and for the incredible successful relationship between Canada and the United States.”
Mexico’s president, Claudia Sheinbaum, also announced new tariffs and suggested the US should do more within its own borders to address drug addiction.
The Chinese government said it would take steps to defend its economic interests and intends to file a lawsuit with the World Trade Organisation.
Rechazamos categóricamente la calumnia que hace la Casa Blanca al Gobierno de México de tener alianzas con organizaciones criminales, así como cualquier intención injerencista en nuestro territorio.
Si en algún lugar existe tal alianza es en las armerías de los Estados Unidos…
— Claudia Sheinbaum Pardo (@Claudiashein) February 2, 2025
For Mr Trump, the open question is whether inflation could be a political pressure point that would cause him to back down.
As a candidate, Mr Trump repeatedly hammered Democrats over the inflation under former president Joe Biden that resulted from supply chain issues during the coronavirus pandemic, the Biden administration’s own spending to spur the recovery and Russia’s invasion of Ukraine.
Mr Trump said his previous four years as president had low inflation, so people should expect the same if he returned to the White House.
But he also said specifically that higher inflation would stagger the US as a nation, a position from which he now appears to be retreating with the tariffs.
“Inflation is a disaster,” he said at a Philadelphia campaign rally. “It’s a country-buster. It’s a total country-buster.”
Outside analyses make clear that Mr Trump’s tariffs would hurt the voters that he intended to help, meaning that he might ultimately need to find a resolution.
An analysis by the Budget Lab at Yale shows, if the tariffs were to continue, an average US household would lose roughly 1,245 dollars (£1,000) in income this year, in what would be the overall equivalent of a more than 1.4 trillion dollar (£1.1 trillion) tax increase over the next 10 years.
Goldman Sachs, in a Sunday analyst note, said that the tariffs come into effect on Tuesday, which means they are re likely to proceed “though a last-minute compromise cannot be completely ruled out”.
The investment bank concluded that because of the possible economic damage and possible conditions for removal that “we think it is more likely that the tariffs will be temporary, but the outlook is unclear”.
