The Canadian dollar has fallen to a four-year low on news that U.S. president-elect Donald Trump is threatening to impose a blanket 25% tariff on all imports from Canada.
Trump said that on his first day in office Jan. 20 he will impose an additional 10% tariff on imported goods from China, and 25% tariffs on all imports from Mexico and Canada.
On social media, Trump said the tariffs are necessary to combat illegal migrants and drug flows across the U.S. border.
Trump vowed to hit Mexico and Canada with a 25% tariff on “ALL products,” saying he would sign an executive order to that effect on his very first day in office.
On his Truth Social platform, Trump wrote: “As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
Representatives for Canada’s federal government in Ottawa didn’t immediately respond to Trump’s tariff threat.
However, Trump campaigned on pledges to implement sweeping tariffs, vowing to raise import levies to 60% for all goods imported from China and to 20% for the rest of the world.
Trump has long said he favors tariffs as a negotiating tool, even with U.S. allies. However, economists warn that Trump’s levies will raise prices for working Americans and fuel inflation.
Some economists have suggested that Trump doesn’t really understand how trade tariffs work and their potential impact on the U.S. economy.
In Canada, news of potentially higher tariffs has caused concern. Higher tariffs could upend the automotive and agriculture sectors that are closely linked with the U.S. and Mexico.
Canada has lessened its reliance on trade with the U.S. since Trump’s first term as president in 2016. To the point that Mexico is now America’s largest trading partner, not Canada.
The Canadian dollar is currently trading at $0.71 U.S., its lowest level since the Covid-19 pandemic began in 2020.
