With a general election in Canada now set for April 28, attention will be focussed south of the border to see what Donald Trump says and does next. Apart from his tiresome and insulting trope about Canada becoming the 51st US state, how best to deal with the economic fallout from the imposition of unilateral US tariffs on Canadian exports to the US will be the big election issue. Indeed, the drumbeat of tariff threats emanating from self-proclaimed “Tariff Man” is becoming overwhelming, both in terms of tariffs already applied, but also regarding potential future tariffs. As we have already seen, the uncertainty and almost daily changes, (government by tweet), are roiling markets and undermining investor confidence. With respect to Canada there have been repeated threats of what is to come while some tariffs, such as those on steel and aluminum that were applied globally, are already in force. Then there are the threatened 25% tariffs on all Canadian (and Mexican) imports, except for energy products which will be taxed at a 10% level, imposing additional costs on US consumers. (The example of potash, an essential product needed by American farmers is an interesting case study. It is basically only available from Canada, unless you import it from Russia, Belarus or China. The US does produce a small amount but 85% of US potash consumption comes from Canada. So much for President Trump’s mantra that Canada has nothing the US needs. When US farmers squealed loudly, the duties on potash were suddenly lowered from 25% to 10% and then suspended completely under an exemption for all products covered by CUSMA).
The 25% tariffs designed to hinder the export of automobiles and car parts (amongst other products) manufactured in Canada from being shipped to the US —a measure which incidentally contravenes the terms of the US-Canada-Mexico Agreement (USMCA/CUSMA)—are temporarily on suspension given the representations made by US auto manufacturers who had to explain to the White House how integrated North American supply chains work, but any products not covered by USMCA/CUSMA are still subject to the 25% tariff. The pretext for this violation of a ratified trilateral trade agreement is supposedly the “national emergency” created by the flow of fentanyl and illegal immigrants from Mexico and Canada. The only problem with this rationale is that, in the case of Canada, there is a greater flow of illegals from the US to Canada than vice versa, and the seizures of fentanyl at the northern border by US officials in 2024 totalled less than 20 kilos, less than one percent of the amount seized on the southern border. Thirteen grams (that’s less than half an ounce) were seized in January. This year, US border officials have caught more people smuggling eggs from Canada into the US (where the price of eggs has shot up owing to avian influenza in US poultry flocks) than fentanyl. But the facts appear irrelevant to the Trump Administration; what is important is to create a pretext to violate the USMCA.
That pretext was used to trigger the International Emergency Economic Powers Act (IEEPA). This legislation allows the President “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States”. It was first enacted in 1977 and is designed to deal with acts of terrorism or other threats to the security of the United States. It confers wide, albeit temporary, powers on the Executive Branch and has been used in situations like the Iran hostage crisis in 1979, the Soviet invasion of Afghanistan and to deal with various identified terrorist groups. Using it to punish Canada because under 20 kg (43 lbs). of fentanyl were seized in the course of a year at the Canada-US border is clearly an abuse of the intent of the Act. Notwithstanding, that is what Trump used to impose USMCA noncompliant tariffs on Canada.
The temporary suspension of the 25% tariffs on Canadian (and Mexican) imports will apparently end on April 2, when Trump plans to impose reciprocal tariffs on a global basis. How these will be calculated is anyone’s guess. The President has indicated that in addition to whatever tariff irritant he can find, he might also include other measures in US calculations that in his view discriminate against US goods and services. Thus, while most US products enter Canada tariff free (with the notable and unfortunate exception of most dairy products, which are subject to Canada’s outdated supply management system), Trump could take aim at other policies he doesn’t like. For example, while many US banks operate in Canada, none of them are full-service retail banks allowed to take deposits (but nor are they required to have the same capital requirements). Then there is the fact that Canada, like the EU, imposes a value-added tax (VAT) on most products (basic foodstuffs being the primary exception), called the GST (Goods and Services Tax). This is another potential target even though it is applied without discrimination to US, Canadian or products from any other country. Likewise, longstanding measures that provide protection and subsidies for Canadian cultural industries, like broadcasting (AV and music) content quotas or more recent mandatory financial contributions to Canadian content funds, along with funding obligations to support local journalism, could potentially become targets.
Would Google try to reopen the commitments it finally made to support Canadian journalism in order to avoid designation under the Online News Act? Will the mandatory “contributions” to Canadian content creation that the CRTC has imposed on foreign streamers become an issue? A prominent US trade association, the Computer and Communications Industry Association (CCIA), went so far as to claim that ”the CRTC’s structure of mandatory contributions contravenes Canada’s commitments to the United States under CUSMA”. While I think that claim is doubtful, if the Trump Administration regards the CUSMA as just a piece of paper to be ignored at will, US industries should think twice about using it as a lever against Canada. In any event, in my view the best approach is to continue to stress the value of cooperation and mutual benefit, as Canada has been trying to do by explaining to the Trump Administration why tariffs are self-defeating. In terms of AV production, the contribution that US content producers make to the Canadian production industry is significant even if there are disagreements about the extent to which US production in Canada helps or hinders creation and distribution of Canadian content.
It is important to note that all countries impose investment or trade restrictions of one sort or another, and the US is no exception. These restrictions are weighed in terms of the balance of reciprocal benefits when trade agreements are negotiated, including the current USMCA/CUSMA signed by Trump himself in his first term. But if you are not inclined to respect the commitments you have made, and intend to ignore carefully negotiated and signed treaties, then any domestic measure can become a target. Uncertainty as to what could happen next is a major concern. Two Canadian cultural industries that are keeping their heads down and hoping for the best are art dealers and book publishing.
Earlier this month, the Globe and Mail reported that art dealers and galleries are facing slowdowns in the face of the uncertainty brought about by the Trump tariff threats. Books, art and other informational materials were granted an exemption when Trump first imposed the tariffs on Canada, using the excuse of fentanyl trafficking. Buried within the legislation used to suspend USMCA/CUSMA obligations, (the IEEPA referred to in paragraph 3 above) is a provision that creates certain exceptions, amongst which is “any information or informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds”, unless controlled by some other authority. (Section 1702 (b)(3)). While US Customs noted the exception when publishing its Notice of Implementation, the on-again/off-again tariff implementation has created anxiety and uncertainty, not least of which is the possibility that any random Customs officer can hold up a shipment based on an individual (mis)interpretation of the regulations. Compounding the issue is the announcement by Canada of 25% retaliatory tariffs that include, among other things (the targets of the retaliation are wide covering everything from toilet paper to drones), “Paintings, drawings and pastels, executed entirely by hand”.
Book publishers are also exempted under the IEEPA and are keeping their heads down, as noted by another article in the Globe. Many Canadian publishers do not ship much to the US but some do, including companies that are exclusively printers rather than full service publishers. In the case of Friesens Corp, a printer in Manitoba, the bulk of their business is from US customers. However, now a new threat has risen for Canada’s independent book sellers. Books have been included on Canada’s retaliation list, and if books from the US are subjected to a 25% retaliatory tariff, the cost will be passed on to bookstores, and ultimately consumers. Independent bookstores already work on very thin margins and an additional charge will likely affect sales. Harm to Canadian business and consumers is the flipside of punishing US exporters, just as harm to US consumers will result from US tariffs on imports. Surely it would be best to leave a cultural product like books out of the trade war.
What happens next with regard to tariffs on exports to the US, from Canada or elsewhere, seems to depend on Donald Trump’s mood of the day. The expected announcement of “reciprocal tariffs” on April 2 will create further uncertainty and likely retaliation, further feeding the spiralling trade war. The fact that import tariffs are levied on the importer and are largely passed on to consumers seems not to have registered with the Trump Administration. They can certainly raise revenues, but if the end goal is to impede imports so that all production is reshored to the US, then presumably the revenue windfall (largely ultimately paid for by US consumers) will ultimately disappear. To depend on tariff revenues to fund more tax cuts in the US is ultimately a self-defeating strategy. In the meantime, the US economy will have suffered the impact of increased prices on all imported goods.
The Trump tariffs have had the effect of causing maximum disruption and chaos, and if that was the goal, then Donald Trump has succeeded. In the meantime, Canadians have until April 28 to figure out which political party and leader is best equipped to help navigate the treacherous waters ahead. Whatever happens, copyright and cultural industries are unlikely to escape getting wet.
© Hugh Stephens, 2025. All Rights Reserved.
This post has been updated to include reference to potential Canadian retaliatory tariffs on US book imports and the impact this will have on independent bookshops in Canada.
This article was first published on Hugh Stephens Blog