Trump reciprocal tariffs loom for Canada April 2

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U.S. President Donald Trump‘s April 2 date for the imposition of reciprocal tariffs on all U.S. trade partners is quickly approaching. But what Canada can expect for what the president has called “Liberation Day” remains unclear.

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U.S. Treasury Secretary Scott Bessent said last week that the U.S. will approach countries with a specific number.

“On April 2, each country will receive a number that we believe represents their tariffs,” Bessent said in an interview. “For some countries, it could be quite low, for some countries it could be quite higher.”

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Bessent said the U.S. would also unpack its areas for concern with each country, which could include high tariffs as well as “non-tariff barriers, currency manipulation, unfair funding (and) labour suppression.”

The Wall Street Journal, reported Sunday that separate sector-specific tariffs — such as the threatened 25 per cent tariffs on autos and potential tariffs on lumber — would be delayed beyond April 2.

What’s on the table for reciprocal tariffs?

Reciprocal tariffs could go into effect almost immediately on April 2 using the president’s emergency economic authority, reported The Wall Street Journal.

Joseph Steinberg, an associate professor in the University of Toronto economics department, said that while there is no clear picture yet of what the reciprocal tariffs might be, non-tariff trade barriers are certainly in play.

“Generally speaking, non-tariff barriers are any economic policies that inhibit trade that are not explicit tariffs,” Steinberg said.

Canada’s digital services tax (DST) is likely fair game, having been a contentious issue even before the Trump administration took over this year.

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However, the White House is also considering value-added taxes (VATs) that would reportedly include Canada’s goods and services tax (GST). The GST applies to both domestic and foreign goods and isn’t specific or discriminatory to the U.S., but Steinberg said the Trump administration is claiming it is discriminatory because Canadian exports to the U.S. don’t have to pay it.

Trump has further claimed American banks aren’t allowed to do business in Canada, which could present grounds for reciprocal tariffs as well.

“U.S. banks are allowed to operate in Canada,” Steinberg said. “They just choose not to, because the banking regulations that we have are stringent, and so it just doesn’t seem to be that profitable for U.S. banks to open at least retail operations.”  Canada’s dairy supply management system could also face reciprocal tariffs, as Trump has declared Canada charges over 200 per cent levies on U.S. dairy products. But these tariffs only apply to imports that exceed a set maximum under the Canada-United States-Mexico Agreement (CUSMA).

For example, according to the 2025 customs tariff schedule, Canada charges 7.5 per cent tariffs on some milk and cream products “within access commitment,” meaning these imports lie within a set quota. If this quota is exceeded, the tariff is raised to 241 per cent.

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Steinberg said the bigger point of contention here is that some dairy imports come with lower quota levels than others, which means there are tighter restrictions on how much the U.S. can supply at lower tariff levels.

The higher import quotas are typically aimed at “upstream dairy products” that haven’t been processed yet, like raw milk for example. Steinberg believes American dairy producers want more market access by raising the quotas for processed dairy products like cheese and yogurt.

But Claire Fan, senior economist at Royal Bank of Canada (RBC), said Canada currently runs a dairy trade deficit with its southern trading partner.

“Under CUSMA, there have already been concessions made on that front,” Fan said. “U.S. dairy exports to Canada have grown from $730 million to about $1.14 billion.”

Could Canada come up with a deal to avoid reciprocal tariffs?

If Canada and other countries were to curb what the Trump administration perceives as “unfair” trade practices, Bessent said the reciprocal tariffs will not go into place.

“Going into April 2, some of our worst trading partners in terms of the way they treat us have already come to President Trump offering substantial decreases in very unfair tariffs,” Bessent said, adding that he’s “optimistic” some tariffs may not come to pass if other countries negotiate deals.

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Steinberg said there are potential options for Canada to make concessions, like eliminating or reducing the DST, which is the most likely scenario, or negotiating softwood lumber prices. In the case of dairy supply management, Steinberg said Canada could either increase its quota for some imports, or redistribute it to include a broader range of dairy products.

In other cases, it’s not quite so cut and dried.

“I don’t see any way that the Canadian government is going to reduce or eliminate the GST, as I just don’t see that as something that’s going to be in play,” Steinberg said, adding that Canada would need to raise this tax revenue elsewhere, by increasing income taxes for example.

How might the U.S. calculate this figure?

The Wall Street Journal reported that the White House previously considered grouping trading partners into three tiers of high, medium and low tariffs, but moved away from this plan and will instead be providing each targeted country with its own custom tariff number.

Steinberg said the U.S. administration would be undertaking a massive project to break down how much each country owes to determine a weighted average. The math is further complicated by adding non-tariff trade barriers to the mix and calculating an equivalent for something like a DST or GST.

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Fan predicted reciprocal tariffs could range within the low to moderate scale for Canada.

Steinberg agreed, noting that from a purely economic perspective, Canada should fall into the lower tariff range — but that it has become a major target since Trump returned to the White House.

“It is likely that these reciprocal tariffs are going to mix cold, hard economics with strategic objectives,” Steinberg said. “Canada could be low; it could be medium. I think it’s unlikely that Canada would be put in the highest (range for reciprocal tariffs).”

What could Canada’s reciprocal tariff number be?

It’s still unclear how high tariffs could go.

Bloomberg reported on Sunday that other existing tariffs, such as on steel, might not be cumulative, which would drastically reduce the impact on those specific sectors. Officials also suggested the paused blanket tariffs on Canada and Mexico (which the U.S. tied to the flow of fentanyl across the border) could be axed entirely and replaced with reciprocal tariffs.

A February study from Yale University’s Budget Lab indicated that Canada could experience the lightest hit from reciprocal tariffs compared to other countries, estimating tariff rates on Canada could climb by 4.59 percentage points.

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Steinberg previously told Financial Post that he couldn’t see the U.S. imposing reciprocal tariffs of more than three or four per cent on Canada, but now he said that figure “could certainly be higher” since it’s clear the Trump administration is adding non-tariff trade barriers to the mix.

“It’s hard to tell how large the average is (since), at the end of the day, when we retaliate, we tend to retaliate dollar for dollar,” Fan said. “What that means is, essentially, you match the overall import or export volume here, as opposed to the percentage itself.”

In that case, Canada is unlikely to face a sweeping tariff of, say, 200 per cent, since some of the trade barriers the U.S. is targeting make up a small fraction of their overall trade, Fan said.

Still, Steinberg is skeptical that the White House will have completed all of its calculations in time for the April 2 deadline.

He believes it’s far more likely the Trump administration will present each country with some preliminary data and begin with applying reciprocal tariffs based on each country’s respective levies. In a month or two months’ time, the U.S. could set more tariffs based on other trade barriers, he said.

• Email: slouis@postmedia.com

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