Trumpian chaos—where we are now and what’s coming for Canada

From the Fraser Institute

As we pause to catch our breath amid the ongoing drama of President Donald Trump’s whack-a-mole tariff war, there’s both good and bad news from a Canadian perspective.

On the positive side, Canada (together with Mexico) was not specifically targeted when the president outlined the details of his so-called “reciprocal” tariffs on April 2. These new levies—ranging from 10 per cent to more than 40 per cent, depending on the country—will affect most categories of exports from virtually every U.S. trading partner, but fortunately not America’s two co-signatories to the Canada-U.S.-Mexico Agreement (CUSMA). Instead, apart from a handful of significant economic sectors (discussed below), Canadian exporters, for the moment, will be able to sell tariff-free into the U.S. market, provided they are compliant with the rules and paperwork requirements stipulated in CUSMA. That’s a ray of sunshine in an otherwise dark sky.

On April 9, the president agreed to a 90-day pause on his sweeping reciprocal tariffs, perhaps because of plunging U.S. and global stock markets and mounting fears of economic calamity. At the same time, he announced a jaw-dropping 125 per cent tariff on imports from China, which then immediately retaliated with steep duties of its own on all U.S. goods entering the country.

The risk remains that when the dust settles, the U.S will end up applying much higher tariffs on imports from most of the world. Should President Trump adopt the reciprocal levies announced on April 2 and stick with the 125 per cent tariff on imports from China, Yale University researchers estimate that the average effective U.S. tariff rate will soar to 25.3 per cent—more than 10 times higher than the average over the preceding 25 years. That’s one measure of the disruption that Trump has visited upon the international trading system.

For Canada, the average U.S. tariff would be lower, between 4 and 5 per cent, reflecting the benefits of CUSMA, albeit somewhat offset by the negative impact of the 25 per cent levies the U.S. is imposing on all imports of steel, aluminum, and motor vehicles and parts, along with separate punitive duties on softwood lumber imported from Canada. American tariffs on these Canadian export sectors will undoubtedly exact a toll on our economy. But the damage would be considerably greater if Canada was subject to across-the-board U.S. reciprocal tariffs.

Where does all of this leave Canada’s $3.3 trillion economy as of the second quarter of 2025?

Late last year, most forecasters were expecting a modest pick-up in growth after a notably lacklustre 2024, mainly thanks to lower interest rates and reduced borrowing costs for households and businesses. However, that widely-shared view didn’t account for President Trump’s wholesale assault on the global economic system—“a new economic crisis,” as Bank of Canada Governor Tiff Macklem described the situation in late March.

Back in February, the central bank took a stab at modelling the effects of matching U.S. and Canadian tariffs of 25 per cent, levied on all bilateral goods trade (apart from energy where a lower tariff rate was assumed). Its projections pointed to a permanent loss of Canadian economic output (real GDP) on the order of 2-3 per cent, a double-digit percentage decline in business investment, weaker consumption and a substantial fall in the value of Canadian exports over 2025/26. The Bank’s modelling also foresaw a lower Canadian dollar and a temporary jump in inflation, with the latter due primarily to Canada’s assumed retaliatory tariffs.

The macroeconomic scenario outlined in the Bank of Canada’s January study was dire enough, signalling a Canadian recession stretching over most of 2025 and well into 2026. But seen through today’s lens, the Bank’s earlier analysis looks too optimistic, as it failed to incorporate the worldwide dimensions of President Trump’s tariff barrage, including the scale of the retaliation planned by America’s aggrieved trading partners.

Even if it escapes the worst of Trump’s tariffs, Canada stands to suffer from a gruesome mix of slower global growth, a probable U.S. recession, and falling prices for oil, minerals and other natural resource products, which collectively comprise around half of the country’s international exports. Already there has been a marked erosion of Canadian business confidence, as reported in the Bank of Canada’s spring Business Outlook Survey, with one-third of firms now expecting a recession and hiring intentions sinking to the lowest level in a decade. Most respondents to the Bank’s survey also anticipate rising business input costs and higher Canadian inflation in 2025.

Worryingly, the latest Bank of Canada survey was completed in February; since then, the intensity of the Trumpian chaos has continued to increase. Among other things, the uncertainty that is an inevitable by-product of the president’s shambolic policymaking is having a decisively negative impact on business investment in many industries—in Canada, to be sure, but also in the United States. As two American business analysts recently observed: “With tariff policy shifting not day by day, but hour by hour… business investment is entirely paralyzed—and will continue to be frozen for the foreseeable future. That is exactly the opposite of what Trump intended.”

It doesn’t help that Canada is in the midst of a federal election, and that the government is therefore “otherwise occupied.” Once Canadian voters have spoken, the government elected on April 28 must deal with a deteriorating economy, navigate through the tariff fog and determine how to reset economic and security relations with our principal ally and commercial partner in the turbulent era of Trump 2.0.

Jock Finlayson

Senior Fellow, Fraser Institute

Related Topics:#FraserInstitute #JockFinlayson CanadaUSTrade TrumpTariffs

Up Next

Rushing to death in Canada’s MAiD regime

Don't Miss

UN committee urges Canada to repeal euthanasia for non-terminally ill patients

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

China’s economy takes a hit as factories experience sharp decline in orders following Trump tariffs

International / 5 hours ago

Javier Millei declassifies 1850+ files on Nazi leaders in Argentina

Business / 7 hours ago

Scott Bessent says U.S., Ukraine “ready to sign” rare earths deal

Business

China’s economy takes a hit as factories experience sharp decline in orders following Trump tariffs

Published on April 30, 2025

Todayville

MxM News

Quick Hit:

President Trump’s tariffs on Chinese imports are delivering a direct blow to China’s economy, with new data showing factory activity dropping sharply in April. The fallout signals growing pressure on Beijing as it struggles to prop up a slowing economy amid a bruising trade standoff.

Key Details:

China’s manufacturing index plunged to 49.0 in April — the steepest monthly decline in over a year.
Orders for Chinese exports hit their lowest point since the Covid-19 pandemic, according to official data.
U.S. tariffs on Chinese goods have reached 145%, with China retaliating at 125%, intensifying the standoff.

Diving Deeper:

Three weeks into a high-stakes trade war, President Trump’s aggressive tariff strategy is showing early signs of success — at least when it comes to putting economic pressure on America’s chief global rival. A new report from China’s National Bureau of Statistics shows the country’s manufacturing sector suffered its sharpest monthly slowdown in over a year. The cause? A dramatic drop in new export orders from the United States, where tariffs on Chinese-made goods have soared to 145%.

The manufacturing purchasing managers’ index fell to 49.0 in April — a contraction level that underlines just how deeply U.S. tariffs are biting. It’s the first clear sign from China’s own official data that the trade measures imposed by President Trump are starting to weaken the export-reliant Chinese economy. A sub-index measuring new export orders reached its lowest point since the Covid-19 pandemic, and factory employment fell to levels not seen since early 2024.

Despite retaliatory tariffs of 125% on U.S. goods, Beijing appears to be scrambling to shore up its economy. China’s government has unveiled a series of internal stimulus measures to boost consumer spending and stabilize employment. These include pension increases, subsidies, and a new law promising more protection for private businesses — a clear sign that confidence among Chinese entrepreneurs is eroding under Xi Jinping’s increasing centralization of economic power.

President Trump, on the other hand, remains defiant. “China was ripping us off like nobody’s ever ripped us off,” he said Tuesday in an interview, dismissing concerns that his policies would harm American consumers. He predicted Beijing would “eat those tariffs,” a statement that appears more prescient as China’s economic woes grow more apparent.

Still, the impact is not one-sided. Major U.S. companies like UPS and General Motors have warned of job cuts and revised earnings projections, respectively. Consumer confidence has also dipped. Yet the broader strategy from the Trump administration appears to be focused on playing the long game — applying sustained pressure on China to level the playing field for American workers and businesses.

Economists are warning of potential global fallout if the trade dispute lingers. However, Beijing may have more to lose. Analysts at Capital Economics now predict China’s growth will fall well short of its 5% target for the year, citing the strain on exports and weak domestic consumption. Meanwhile, Nomura Securities estimates up to 15.8 million Chinese jobs could be at risk if U.S. exports continue to decline.

Business

Scott Bessent says U.S., Ukraine “ready to sign” rare earths deal

Published on April 30, 2025

Todayville

MxM News

Quick Hit:

During Wednesday’s Cabinet meeting, Treasury Secretary Scott Bessent said the U.S. is prepared to move forward with a minerals agreement with Ukraine. President Trump has framed the deal as a way to recover U.S. aid and establish an American presence to deter Russian threats.

Key Details:

Bessent confirmed during a Cabinet meeting that the U.S. is “ready to sign this afternoon,” even as Ukrainian officials introduced last-minute changes to the agreement. “We’re sure that they will reconsider that,” he added during the Cabinet discussion.
Ukrainian Economy Minister Yulia Svyrydenko was reportedly in Washington on Wednesday to iron out remaining details with American officials.
The deal is expected to outline a rare earth mineral partnership between Washington and Kyiv, with Ukrainian Armed Forces Lt. Denis Yaroslavsky calling it a potential turning point: “The minerals deal is the first step. Ukraine should sign it on an equal basis. Russia is afraid of this deal.”

Diving Deeper:

The United States is poised to sign a long-anticipated rare earth minerals agreement with Ukraine, Treasury Secretary Scott Bessent announced during a Cabinet meeting on Wednesday. According to Bessent, Ukrainians introduced “last minute changes” late Tuesday night, complicating the final phase of negotiations. Still, he emphasized the U.S. remains prepared to move forward: “We’re sure that they will reconsider that, and we are ready to sign this afternoon.”

As first reported by Ukrainian media and confirmed by multiple Ukrainian officials, Economy Minister Yulia Svyrydenko is in Washington this week for the final stages of negotiations. “We are finalizing the last details with our American colleagues,” Ukrainian Prime Minister Denys Shmyhal told Telemarathon.

The deal follows months of complex talks that nearly collapsed earlier this year. In February, President Trump dispatched top officials, including Bessent, to meet with President Volodymyr Zelensky in Ukraine to hammer out terms. According to officials familiar with the matter, Trump grew frustrated when Kyiv initially refused U.S. conditions. Still, the two sides ultimately reached what Bessent described as an “improved” version of the deal by late February.

The effort nearly fell apart again during Zelensky’s February 28th visit to the White House, where a heated Oval Office exchange between the Ukrainian president, Trump, and Vice President JD Vance led to Zelensky being removed from the building and the deal left unsigned.

Despite those setbacks, the deal appears to be back on track. While no public text of the agreement has been released, the framework is expected to center on U.S.-Ukraine cooperation in extracting rare earth minerals—resources vital to modern manufacturing, electronics, and defense technologies.

President Trump has publicly defended the arrangement as a strategic and financial win for the United States. “We want something for our efforts beyond what you would think would be acceptable, and we said, ‘rare earth, they’re very good,’” he said during the Cabinet meeting. “It’s also good for them, because you’ll have an American presence at the site and the American presence will keep a lot of bad actors out of the country—or certainly out of the area where we’re doing the digging.”

Trump has emphasized that the deal would serve as a form of “security guarantee” for Ukraine, providing a stabilizing American footprint amid ongoing Russian aggression. He framed it as a tangible return on the billions in U.S. aid sent to Kyiv since the start of Russia’s 2022 invasion.