On Wednesday, March 5, 2025, a tense exchange occurred between U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau over the newly introduced tariffs on Canadian imports. Trudeau had openly criticized Trump’s decision to impose a 25% tariff on Canadian goods the previous day.
Unexpectedly, on Thursday, March 6, Trump approved tariff exemptions for several goods imported from Canada and Mexico, despite taking the two countries to the edge of a trade conflict.
These exemptions, remaining in effect until April 2, apply to goods that meet the standards established by the North American Free Trade Agreement during Trump’s initial term. After April 2, Trump plans to roll out another round of retaliatory tariffs against various countries.
As per a senior administration official, the exemption will cover nearly half of the goods imported from Mexico and approximately 38% of goods from Canada. This includes key components like potash used in fertilizers.
A 10% tariff will be imposed on certain Canadian energy products, with all other goods, including Mexican-made computers, subjected to a 25% tariff, the official added.
Following his discussion with Trudeau, Trump took to Truth Social, describing the conversation as “somewhat” cordial but accusing Trudeau of political maneuvering. Trump referred to the issue of Fentanyl crossing the borders from Canada and Mexico, stating that Trudeau’s assurances of improvement were “not good enough.”
Trump accused Trudeau of utilizing the tariff dispute for political gains, adding that Trudeau was unable to provide the date of the Canadian election, which raised Trump’s suspicions about Trudeau’s political motives.
This heated conversation followed Trudeau’s press conference on Tuesday, March 4, in which he directly addressed Trump. He echoed a previous Wall Street Journal assessment of Trump’s tariff policies, stating, “Even though you are a very smart guy, this is a very dumb thing to do.”
According to the Canadian government, less than 1% of Fentanyl seized at the U.S. border originates from Canada. In response to the issue, the Canadian government has introduced a $1.3 billion border plan and other measures. Despite these actions, Trump continues to deem Canada’s Fentanyl prevention measures inadequate.
In retaliation to the U.S. tariffs, Trudeau threatened to impose a 25% tariff on $155 billion of American goods, beginning with an immediate $30 billion and the remaining $125 billion within 21 days if the dispute remains unresolved.
During his Tuesday press conference, Trudeau criticized the U.S. for engaging in a trade war with Canada, its closest ally, while simultaneously showing willingness to cooperate with Russia and appease Vladimir Putin, whom Trudeau described as a deceitful and brutal dictator.
The trade dispute has already impacted markets and consumer confidence on both sides of the border. In 2024, the U.S. imported goods worth $412 billion from Canada, making Canada the third-largest trading partner of the U.S., according to the U.S. Census Bureau.
On Wednesday, however, Trump did provide a temporary relief for some businesses. Commerce Secretary Howard Lutnick announced a one-month exemption from the 25% tariffs for automakers complying with the existing free trade agreement, a move particularly beneficial for Detroit, Michigan automakers like Ford, General Motors, and Stellantis.
Additional retaliatory measures have been threatened by Canadian provincial leaders, including the potential cessation of electricity exports to the U.S. and the prohibition of U.S. companies from bidding on provincial contracts. This has sparked fears of an extended trade war involving the U.S., Canada, and Mexico, with experts cautioning that such a situation would result in “everyone being a loser”.
Trudeau maintains that the tariffs violate the United States-Mexico-Canada Agreement (USMCA), a trade pact that Trump negotiated during his first term. He stated during his press conference, “We’re insulted, we’re angry, but we’re Canadian, which means we’re gonna stand up for each other, we’re gonna fight…and we’re gonna win.”
Trump has repeatedly suggested that Canada could avoid tariffs by becoming the “51st state” of the United States.
The proposed tariffs could increase prices for consumers in both countries and potentially result in job losses, particularly in the automotive sector. Economists warn that these measures could hinder economic growth in both countries if the dispute persists.
The Brookings Institution has cautioned that imposing 25% tariffs on most imports from Canada and Mexico could jeopardize the future of the USMCA. Experts recommend that the best way forward would be for all three countries to enhance their economic integration and competitiveness in North America while addressing non-trade issues such as migration and drug interdiction.
