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Canada signals willingness to accept US tariffs
Canadian Finance Minister François-Philippe Champagne suggested on Thursday that baseline tariffs may be an unavoidable cost for continued access to the U.S. market, following President Donald Trump's push to replace income taxes with import levies as America's primary revenue source.
Trump's tariff strategy gains momentum
During his State of the Union address this week, Trump reiterated his long-standing proposal to phase out income taxes in favor of tariffs, framing the shift as a way to relieve financial pressure on American citizens. "As time goes by, I believe the tariffs, paid for by foreign countries, will substantially replace the modern-day system of income tax," he told Congress.
Trump's latest move came after the U.S. Supreme Court struck down his sweeping tariff policy last Friday in a 6-3 ruling, which found he had exceeded his authority. In response, he invoked Section 122 of the 1974 Trade Act-a previously unused provision-to impose a 10% global tariff on Tuesday. The law allows the president to set tariffs of up to 15% for 150 days, after which Congress must intervene.
Canada's trade chief echoes tariff expectations
U.S. Trade Representative Jamieson Greer had earlier indicated that Canada would need to accept "some level of higher tariff" to maintain trade relations. Speaking to CBC on Tuesday, Greer suggested a potential quid pro quo: "If Canada wants to agree that we can have some level of higher tariff on them, while they open up their market to us in things like dairy and other things, then that's a helpful conversation."
Canada currently benefits from exemptions under the U.S.-Mexico-Canada Agreement (USMCA) but faces elevated tariffs on steel, aluminum, and softwood lumber.
Canada's response and diversification push
Champagne acknowledged the shifting trade landscape in Ottawa, stating, "I think it is pretty well understood now in the world that the view of the American administration is that there'll be a price to access the American market." He added that Canada is "paying the lowest price" compared to other nations but did not specify how tariffs might be structured moving forward.
Prime Minister Mark Carney has responded to the tensions by announcing plans to double Canada's non-U.S. exports over the next decade, targeting sectors like metals and automotive manufacturing. The U.S. remains Canada's dominant trade partner, accounting for roughly 75% of its exports.
Legal and economic implications
The Supreme Court's ruling against Trump's initial tariff policy has not deterred his administration from pursuing alternative legal avenues. Section 122, now activated, could set a precedent for future trade actions, though its temporary nature leaves long-term policy uncertain.
Analysts warn that escalating tariffs could disrupt supply chains and increase costs for consumers in both countries, particularly in industries reliant on cross-border trade.
