Advantage India, as US ally Canada is battered by Trump
The US order on 25% tariff on Indian imports, coupled with an unspecified penalty tied to India’s trade policies and its dealings with Russia on oil and military equipment, comes into force on Friday, August 1. While this poses challenges for India, the situation is notably more precarious for Canada, a historically close ally of the US, which now faces harsher measures.
The US has imposed a staggering 35% tariff on unspecified Canadian goods, a 50% tariff on copper, and equivalent tariffs on Canadian steel and aluminium. Additionally, all non-USMCA-compliant Canadian goods will face a 25% tariff. This dramatic escalation follows President Trump’s pointed criticism of Canada’s support for Palestinian statehood, as expressed in his Thursday morning tweet, “Wow! Canada has just announced that it is backing statehood for Palestine. That will make it very hard for us to make a Trade Deal with them. Oh’ Canada!!!”
By evening, the White House confirmed that President Trump had signed an executive order increasing tariffs on Canadian goods to 35%. The official statement cited Canada’s failure to co-operate in controlling the influx of fentanyl and retaliatory actions against US policies, addressing what Trump termed an “unusual and extraordinary threat.”
These developments place Canada in an economically vulnerable position. As the US’ largest trading partner, with $2.5 billion in daily goods and services exchange, Canada’s economy is heavily reliant on US market access. Trade constitutes 67% of Canada’s GDP, making any disruption in cross-border commerce highly consequential.
Experts emphasise that US tariffs pose a direct threat to Canada’s economic stability. Research indicates that these tariffs are already reducing exports, triggering job losses, and slowing economic growth, particularly in manufacturing and trade-dependent sectors. According to the Financial Accountability Office of Ontario (FAO), around 55,000 manufacturing jobs have been lost since January 2025. Projections suggest Ontario could face up to 68,100 job losses in 2025, escalating to 1,19,200 by 2026, and potentially reaching 1,37,900 by 2029.
Further compounding the crisis, reports warn that without matching US tax incentives, Canada could lose an additional 2,10,000 jobs over the next decade due to declining foreign direct investment. Some economists predict that tariffs could reduce Canada’s real GDP growth by about 2 percentage points in 2025, bringing growth perilously close to zero.
Sectors like steel, aluminium, and automobiles are bearing the brunt of these tariffs. US-bound exports, which account for about 75% of Canada’s total exports, have seen a significant decline. Data reveals a 15% drop in exports to the US in April 2025, part of a broader trend showing a 26.2% decrease since January 2025, following record highs earlier in the year, according to Global Affairs Canada.
This downturn has led to a rise in Canada’s unemployment rate, now at 6.7% in 2025 compared to 5% in 2023. While Canada’s GDP growth was 2.2% in Q1 2025, a further slowdown is anticipated due to reduced demand and disrupted supply chains exacerbated by escalating tariffs.
The Bank of Canada had earlier described the tariffs introduced under the Trump Administration as highly disruptive, with adverse impacts on spending, trade flows, government revenue, exchange rates, employment, GDP and inflation.
Meanwhile, India is navigating the situation with a mixed outlook. While key exports such as gems, jewellery, electronics, auto parts and chemicals will be affected, sectors like textiles and apparel may benefit. With China facing even steeper tariffs of 145%, Indian textile exports could capitalise on the opportunity to fill the gap in the US market.
Domestically, political responses in Canada are varied. While Prime Minister Mark Carney’s reaction is awaited, Ontario Premier Doug Ford has expressed deep concern. He has urged the federal government to retaliate with 50% tariffs on US steel and aluminium. In a strongly worded tweet, Ford stated, “Canada shouldn’t settle for anything less than the right deal. Now is not the time to roll over. We need to stand our ground.”
The road ahead appears challenging for Canada. President Trump, who once hinted at using “economic force” to “get rid” of the US-Canada border and making Canada US’ 51st state, seems to be actualising that vision through aggressive trade policies. As Canada grapples with the economic fallout, the global community watches closely, aware that the repercussions could extend far beyond North America’s borders.
For Canada, the imperative now is to strategise effectively, balancing diplomatic efforts with robust economic measures to mitigate the adverse impacts of US tariffs. The next few months will be critical in determining whether Canada can navigate these turbulent waters and safeguard its economic future.
Diaspora