WASHINGTON: President Donald Trump escalated his campaign against Canada when he threatened on Monday to impose 50 percent tariffs on all automobiles, trucks, and auto components imported from its northern neighbor beginning January 1. This comes following failed negotiations between the two nations last week, which saw the breakdown of their already tense bilateral trade ties.
Trump Threatens 50pc Tariffs: The Deal That Fell Through
Trump threatens 50pc tariffs, Canada was expected to reduce its most-favored-nation duty on automobiles and trucks to 15 percent, down from 25 percent. Tariffs on aluminum and steel imports would fall from 50 percent to 25 percent under this agreement. However, the deal unraveled on Friday due to several issues, including how Canada viewed the US tariff reduction proposal for both medium and heavy-duty trucks along with automobiles.
The U.S. President tweeted in reaction to the failed trade negotiations. “Build in America and pay NO TARIFFS. No longer will Canada get special treatment as if it were a state!” In contrast to other disputes involving either of the parties, this one saw a much harsher approach adopted by Mr. Trump towards his Canadian counterparts.
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Any tariff increase to 50 percent levied against automobiles manufactured in Canada will be a huge increase compared to existing levels, affecting car imports and truck parts coming from Canada into the US. With the extent to which the automobile manufacturing industry has become integrated across North America, such a huge tariff hike may have far-reaching consequences for producers, suppliers, and customers alike in both countries.
Negotiations failed due to differences regarding the medium- and heavy-duty truck tariff rates. The initial agreement was aimed at cutting down the tariffs on light-duty trucks, but no resolution on whether similar cuts could apply to other categories of trucks remained pending. The difference on this point proved crucial to the failure of the negotiations. A close examination of these negotiations indicates that this disagreement contributed significantly to their collapse.
The imposition of tariffs is now scheduled to start on January 1, leaving both governments less room to negotiate further and come up with an agreement on their own terms. Considering the significance of the bilateral trade relationship in the automobile industry, especially considering the value of trade flows, developments related to this particular issue will probably attract significant attention from various stakeholders involved on both sides of the Canada-US border.