Only Canada and China have opted to impose counter-tariffs in response

Only Canada and China have opted to impose counter-tariffs in response to U.S.
tariffs.

Steve Verheul, regarded as a key figure in shaping Canada's trade policy during his public service tenure, made these comments during a panel at the Broadbent Institute's Progress Summit on April 10. According to Verheul, Canada stands almost alone in adopting countermeasures against American tariffs. Retaliatory tariffs affecting select American auto exports were implemented on April 9. Canada has instituted a range of counter-tariffs in reaction to U.S. duties on automobiles, steel, and aluminum, as well as on products not compliant with the Canada-United States-Mexico Agreement (CUSMA), enacted by former President Donald Trump ostensibly to address opioid concerns. "Canada is in a precarious position," stated Verheul. "Few countries are retaliating—only Canada and China have taken action." Mexico has opted against retaliatory measures, while the European Union has suspended retaliation following Trump's announcement of a 90-day pause on "reciprocal" tariffs, opting instead for a blanket 10 percent levy. "We're somewhat isolated, and that's typically not an advantageous position," Verheul noted. As a current member of the Prime Minister's Council on Canada-U.S. Relations, Verheul participated in the panel alongside Beth Baltzan, a former trade and investment advisor in the Office of the U.S. Trade Representative under the Biden administration, with NDP strategist Brian Topp moderating. Verheul expressed disappointment that many other nations did not perceive retaliation as a viable strategy.

He suggested that if countries coordinated their responses after the 90-day tariff pause, it could significantly challenge the U.S.'s approach, reinforcing the importance of adhering to established trade laws that have governed international commerce for decades. He emphasized that countermeasures hold value in ensuring the U.S. "feels some pain," encouraging internal resistance to tariffs imposed on Canada. Canada has implemented a 25 percent tariff on non-CUSMA compliant fully assembled vehicles and on U.S. vehicles with non-Canadian or non-Mexican components. This is part of a broader $30 billion in countermeasures due to emergency tariffs from the U.S., which also includes $29.8 billion levied against U.S. steel and aluminum tariffs. Verheul argued that without such retaliation, countries can find themselves in an imbalanced negotiating posture with the U.S. "If you're always conceding without knowing the outcome, it creates a challenging negotiating environment," he stated. "The absence of countermeasures makes it hard to reach a fair settlement." He asserted that countermeasures provide leverage in negotiations. Topp mentioned discussions within the Council on Canada-U.S. Relations, where some suggested that U.S. tariffs were a form of self-harm and argued for Canada to allow the repercussions to unfold without intervention.

"That's the approach taken by several U.S. trade partners," he said. "We chose a different path." Topp shared that both he and Verheul advocated for an active response, stating that one cannot passively accept being overrun by a primary trade partner. Baltzan pointed out that efforts to deter the Trump administration could be interpreted as validation of the president's notions of an "extractive relationship" between the U.S. and its trading partners. She commented on the unpredictability of leverage points that might successfully influence U.S. policy directions, emphasizing the need to respect each country's unique context and sovereignty. Long-Term Solutions for Trade Diversification: Verheul addressed the growing emphasis on trade diversification, noting that Canada's deep-rooted dependence on the U.S. market is unlikely to change in the near future. "We should strive to lessen our reliance on the U.S., which has clearly demonstrated itself as an unreliable partner," he remarked. He advocated for addressing internal trade barriers and more effective utilization of existing trade agreements, alongside enhancing capacity to export to global markets. "However, these strategies are not quick fixes," he cautioned. "Accessing alternative markets can often be complex and time-consuming." Liberal Leader Mark Carney has echoed the call for Canada to diversify its trade dynamics beyond the United States.
Verheul acknowledged the uncertainty businesses face regarding future conditions, explaining that while a firm might seek to shift its export markets, by the time such adjustments are realized, the U.S. might have re-emerged as a viable trade partner. "At the end of the day, we have to acknowledge the necessity of maintaining some kind of trading relationship with the U.S.," he concluded. "This relationship may evolve, but both sides have needs that must be navigated."