By BDC
In a dramatic turn of events, the White House announced 90-day pause and major amendements to the latest round of tariffs (the reciprocal tariffs.)
While trade tensions in the first quarter were initially confined more to North America and China, the US announced sweeping tariffs in early April that have thrown international trade as we’ve known it for decades into disarray.
On April 2, the world’s most important economic power announced tariffs targeting almost all countries. Doing so, the US administration hopes, to reduce its trade deficit that has been growing for decades and, which reached unprecedented levels in January and February 2025.
But now, a new 90-day pause on tariffs was announced on April 9, the day reciprocal tariffs were meant to hit (almost) the entire globe.
Tariffs: Where we stand vs. the rest of the world
As the announcements multiply, it becomes difficult to know what is now subject to these new tariffs and by how much.
At the miminum, tariffs of 10 percent were imposed on imports from all countries from April 5 and “reciprocal tariffs” were supposed to be imposed starting April 9 with rates varying from country to country and product to product.
Breaking news on April 9, the country-specific tariffs are now down to a universal 10 percent rate for all trade partners and were put on paused for 90 days, except China who saw its tarriff rate jump to 125 percent instead.
While Canada seemed to have avoided yet another layer of tariffs following the announcement of April 2, the changes of April 9 should also be affecting Canada according to the US treasury secretary. At the time of writing, it’s not entirely clear what the specific impact will be for Canada.
For one, businesses in the automotive, steel and aluminium sectors are still facing significant challenges as their products were hit with 25 percent tariffs earlier that remain in place. Additional, tariffs on lumber exports are also subject to higher rates (from 14% to 34 %).
Overall, Canadian goods were exempt from the initial 10 percent minimum from the reciprocal tariffs announcement. Therefore, Canada appears to have retained a certain advantage over the rest of the world when it comes to access to the US market since tariffs imposed on Canada are still less onerous than those on countries with a similar trading relationship with the United States as USMCA compliants remained favoured to 0 percent tariffs.
It’s not the (total) end of international trade
International trade plays a crucial role in the global economy, acting as a powerful engine of growth, development and prosperity for nations. International trade was just picking up again at the end of 2024.
There are fears the trade conflict could escalate with key economies hitting the US with retaliatory measures. Already, China responded with 84 percent tariffs on imports of all US products prior to the administration halt to reciprocal tariffs and hike of 125 percent tariffs on chinese goods. This trade war could trigger a brutal global economic slowdown and rekindle inflation.
Even Canadian businesses that serve non-US markets or are tariff-exempt under the USMCA may be adversely affected by a general economic slowdown and tariffs on supply chain partners.
The announcement of tougher-than-expected tariffs (on April 2) sent shockwaves through financial markets, sending global equities tumbling: five trillion US dollars that evaporated between April 2 and 4 alone. The stock market turmoil eased after the 90-day pause announcement but, still losses of global wealth could also weigh on the real economy.
Manufacturers still on the frontlines
Manufacturers are a leading force in the global economy. Their spending and hiring decisions can quickly affect global growth. This is obviously the sector that’s most sensitive to tariffs.
US tariffs on Canadian raw materials—including steel, aluminum and automotive—will hurt Canadian exports of these products to the US because of higher prices caused by tariffs.
The US oil and gas industry, as well as the transportation, construction and consumer goods sectors, are all major customers for imported products that have been hit with new tariffs. And, a slowdown is already being felt south of the border.
The US economy could, therefore, be heading into a cycle of stagflation—a period characterized by above-target inflation and weak growth. Some 640,000 Canadian manufacturing jobs depend on US demand. This dependence is even greater in the automotive sector, where about seven out of 10 jobs are linked to exports to the US.
The scale of the challenge is undoubtedly huge for manufacturing companies linked to the steel, aluminum and automotive sectors. A slowdown will be felt most powerfully by these industries and in regions where they are concentrated, but the negative effects will extend throughout the economy.
On the bright side (dare we say it)?
The latest announcement should remove some of uncertainty. Now that the US administration has provided more detail on its tariff measures, companies are in a better position to adapt to them and deal with trade tensions appropriately.
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