# Booze, oil and orange juice: How Canada could fight Trump tariffs

**3 March 2025**

**Nadine Yousif**

**BBC News, Toronto**

Watch as leaders of Canada, US and Mexico trade warnings over tariff threats

Canada is expected to react forcefully and immediately to tariffs imposed by US President Donald Trump on its products.

Trump has said he is going ahead with putting a 25% tariff on goods from Canada and Mexico, starting on Tuesday.

Last month, Trump put on pause his plans to levy a 25% tariff on most Canadian imports, with "energy resources" only facing a 10% rate.

Now that that pause has ended, and the US is now set to steeply tax goods from one of its top trading partners, a trade war seems almost certain.

Canadian Foreign Minister Melanie Joly told reporters later on Monday: "Let's be clear, if Trump is imposing tariffs, we're ready."

She said Ottawa planned to impose retaliatory tariffs against US imports of C$155bn ($107bn; £ 84bn), with the first tranche of $30bn ready immediately to be levied on everyday goods like pasta, clothing, and perfume.

Tariffs are a central part of Trump's economic vision. He sees them as a way of growing the US economy, protecting jobs, and raising tax revenue.

Economists suggest that such a move could have devastating immediate impacts on Canada's economy - while also leading to higher prices for Americans.

"I won't sugarcoat it - our nation could be facing difficult times in the coming days and weeks," Trudeau said in a televised address to Canadians.

Canada had worked to avoid a trade war. It has pledged more than C$1bn ($690m; £560m) to boost security at its shared border with the US - a key point of contention for Trump, who appears to be using tariffs as a negotiating tactic.

Trudeau has said in the past that all options for responding are on the table - here are four of them, and their possible impacts.

## 1. Targeted tariffs on select US goods

Canada has already fought one tariff "war" with Trump.

During his first term, the US president slapped 10% tariffs on Canadian aluminium products and 25% tariffs on Canadian steel, citing national security concerns.

Ottawa retaliated by imposing tariffs on select goods, which were chosen to send a political message to Trump and his allies.

It put levies on Florida orange juice, and whiskey and bourbon from Tennessee and Kentucky - the latter being the home of then-Republican Senate Leader Mitch McConnell.

Both countries ended up agreeing to lift the tariffs a year later.

Senior Canadian officials recently told local media that if Trump imposed tariffs again, the immediate response would likely be targeted.

According to US government data, 17% of US exports go to Canada. More than 75% of Canada's exports go to the US.

Canada stands to suffer a larger economic blow in any trade war with the US and this stark imbalance is why targeted tariffs are often the first and safest approach, said Peter Clark, a lawyer who previously worked on trade policy issues in Canada's federal finance department.

By targeting select goods, Canada can hit the US without widely punishing its own citizens, as tariffs can immediately raise prices for consumers at home.

This approach is also why officials are pushing a "Buy Canadian" campaign as a way to lessen the impact of a potential retaliation.

But pundits argue that Trump is less politically vulnerable this time, given that he cannot run for a third term in the White House.

" You won't have the same impact as last time," said Julian Karaguesian, an economics lecturer at McGill University in Montreal and a former finance counsellor at the Canadian embassy in Washington DC.

## 2. Dollar-for-dollar tariffs

Another move Canada made in its first tariff war with its neighbour was to apply dollar-for-dollar tariffs.

It slapped identical tariffs on US aluminium and steel, and ensured the total dollar value of the American goods it taxed equalled the US tariffs on Canadian exports. That came up to around C$16.6bn at the time.

This time, the possible use of dollar-for-dollar tariffs could be much larger, with Canada posting a list of $30bn of potential goods it would tax "until the U.S. eliminates its tariffs against Canada."  is heavy on agricultural products, but also includes inedible items like dental floss and luggage.

That could be expanded to another C$110bn worth of goods.

But the more sweeping Trump's tariffs are, the more goods Canada could tax in response.

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Not all of Canada is on board with dollar-for-dollar tariffs. Scott Moe, leader of the mineral-rich province of Saskatchewan, has said that broad levies on US goods would "rip this country apart".

Mr Karaguesian said the promised US tariffs on Canadian goods could plunge the country into a recession. If Canada responds with dollar-for-dollar tariffs, it could lead to inflation.

This would result in "stagflation," he said, referring to a combination of high unemployment and rising prices.

Mr Clark said that whatever decision Canada took, politics would likely be top of mind. Polls suggest a majority of Canadians support retaliation, and that many Canadian business leaders want targeted, dollar-for-dollar tariffs.

Canadian politicians might be pushed to respond more forcefully if it means a boost in approval, Mr Clark said. "We're talking about political decisions, which are not always rational."

## 3. The energy 'nuclear' option

One of the most valuable assets in Canada's arsenal is energy.

North-eastern US states like Vermont, New York, and Maine significantly rely on electricity sold to them by neighbouring Canadian provinces. British Columbia and Manitoba also supply energy to western and Midwestern regions of the US.

About 30 states receive some of their electricity from Canada, according to Canadian government data.

Canada is also the top supplier of crude oil to the US, making up 60% of total oil imports, according to the US Energy Information Administration.

Doug Ford, Ontario's premier, has suggested that Canada cut off Americans' supply to pinch Americans at the petrol pump.

"The only thing that would really sting in the immediate to short-term is if energy prices went up, because Trump himself campaigned on bringing energy prices down very quickly," said Mr Karaguesian.

But the move would be contentious, especially with the oil-rich province of Alberta - which has refused to sign off on taxing its oil and gas exports, arguing that doing so would disproportionately hurt its economy.

## 4. Pulling US booze - or not retaliating at all

Other ideas have been floated.

Ford said that Ontario could pull American-made alcohol off shop shelves in the province, signalling a different approach in which different provincial premiers could define their own responses.

Another option is not retaliating - at least for now. For weeks, Canadian officials have been meeting their American counterparts in Washington DC in a bid to stave off any American tariffs in the first place.

But that seems unlikely, with Joly saying on Monday that retaliatory tariffs would go into effect if the US imposed the 25% levies.

Canada has also signalled that it could bring in a relief programme for businesses harmed by the possible tariffs, similar to those introduced during the Covid pandemic.

Some argue, given the economic costs of retaliation, that Canada should instead focus on diversifying its trade relationships and increasing domestic production.

"We're a natural resource superpower," Mr Karaguesian said, adding that the country could use the tariffs as a push to harness that potential and sell its products elsewhere.












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