Canada's energy minister came to Washington this week to warn U.S. lawmakers about President-elect Donald Trump's tariffs threat on Canada: They'd inflict economic pain on Americans, with higher prices and job losses.
Jonathan Wilkinson, Canada's minister of energy and natural resources, said he feels obligated to sound the alarm about the inflationary risks being created by a president who was elected in large part on the promise of bringing down prices.
"It will mean higher gas prices, it will mean higher food prices, it will mean higher natural gas prices for heating people's homes,” he told The Associated Press on Wednesday. “It will mean higher electricity prices. That's not something Donald Trump campaigned on. He campaigned on actually reducing the price of energy.”
Trump has threatened to impose sweeping 25% tariffs on Canada as well as on Mexico. He's also threatened tariffs on China and Europe, creating a sense of uncertainty about whether this is simply a negotiating ploy or a massive restructuring of U.S. foreign relations.
Trump and his team in recent days have doubled down on his promise to impose tariffs on other nations and downplayed the risk of higher inflation.
“In his first term, President Trump instituted tariffs that created jobs, spurred investment, and resulted in no inflation," said Karoline Leavitt, a transition spokesperson who is also the incoming White House press secretary. "President Trump will work quickly to fix and restore an economy that puts American workers first by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations, and unshackling American energy.”
Canada is looking at putting retaliatory tariffs on American orange juice, toilets and some steel products if Trump follows through with his threat. When Trump imposed higher tariffs during his first term in office, Canada announced billions of dollars in new duties in 2018 against the U.S. in a tit-for-tat response to new taxes on Canadian steel and aluminum. The dispute never triggered broader inflation across the economy, even if it exacted higher costs for some.
But by targeting America's second largest trading partner after Mexico, Trump risks upending the markets for autos, lumber and oil — all of which could carry over quickly to consumers.
“I do think that people just need to understand that we're going down a path right now that will elevate the cost of living for people in the United States for no benefit," Wilkinson said. "Zero benefit.”
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Wilkinson is considering a run to lead the Liberal Party in Canada after Prime Minister Justin Trudeau announced his resignation this month. He expects to make a decision at the end of the week.
While Trump has said he would announce tariffs immediately after taking the oath of office Monday, it's still not publicly clear what that would actually entail. It's possible he could simply announce intentions to put in tariffs, phase them in on a schedule or simply declare an economic emergency to justify higher taxes on imports.
Trudeau said Wednesday that "nothing is off the table” when it comes to responding to proposed tariffs, but no single region of the country should bear the full brunt from that response. He held a five-hour meeting in Ottawa with the country’s premiers to discuss Trump’s threats.
Even though Trump has signaled a willingness to act on his own, Democrats are looking to place legislative guardrails on his ambitions — a sign that they take the kinds of scenarios being outlined by Canada, Mexico and others seriously.
Reps. Suzan DelBene, D-Wash., and Don Beyer, D-Va., introduced legislation Wednesday that would roll back the International Emergency Economic Powers Act, which gives the president authority to impose sanctions on hostile foreign nations that pose an emergency threat to the U.S.
DelBene said on a call with reporters to preview the legislation that Trump's tariffs constitute a “nationwide sales tax on foreign goods that saddles families with higher prices." “This is the textbook definition of a trade war," she said.
Despite Trump's claim that the U.S doesn't need Canada, a quarter of the oil America consumes per day is from there.
Wilkinson said that, in addition to consumer prices increasing, the U.S. could face job cuts in areas that process Canadian energy products, including the Midwest and Gulf states. "If you don't have access to Canadian gas, you can't do that. The same is true with potash.”
The threat from Canada comes as concerns over the impact of Trump’s tariff proposals on the U.S. economy and inflation mount in business boardrooms, on Wall Street trading floors and among Federal Reserve officials. The Fed has already indicated it is worried tariffs could slightly lift U.S. inflation.
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Neel Kashkari, president of the Fed’s Minneapolis branch, said Wednesday that a one-time tariff imposed by the U.S. likely wouldn’t worsen inflation much in the long run. But once other countries retaliate, Kashkari said, the impact could worsen.
“If there’s tit-for-tat, that becomes much more complicated to try to forecast, what is the imprint of that on actual inflation going forward,” he said.
Wilkinson said, “My focus is actually to try and get us away from the conversation on tariffs, which I would say is lose-lose."