Trade War Heats Up! US Imposes Tariffs, Canada Retaliates, Trump Threatens to Escalate, Later Lutnick Says Possible Compromise Between US, Canada, and Mexico

The US-Canada tariff war has begun! After US President Trump confirmed that the US would impose a 25% tariff on Canada starting from this Tuesday, the Canadian government quickly retaliated with tariffs on the US. Trump stated that he would immediately impose equivalent tariffs in response to Canada's retaliatory tariffs. However, the US Secretary of Commerce later brought hope that the US might reduce its tariffs.

On Tuesday, March 4th, after the US stock market closed, US Secretary of Commerce Wilbur Ross said: "Trump will reach some kind of compromise on the tariff issue with Mexico and Canada, and we may announce this tomorrow. Trump may lower the tariffs on both countries."

After Ross's remarks, the Canadian dollar and Mexican peso, which had turned positive in late trading, saw their gains expand, reaching new daily highs and moving away from the four-week lows they hit earlier in the day. The US dollar against the Canadian dollar once approached 1.4370, falling more than 0.7% during the day.

The US dollar against the Mexican peso once fell below 20.50, dropping about 1% during the day.

Canada Announces Retaliatory Tariffs, Trump Warns of Counter-Tariffs

Before this, during the early trading hours of US stocks on Tuesday, according to CCTV News, Canadian Prime Minister Justin Trudeau announced a 25% retaliatory tariff on products imported from the United States. Canada will immediately impose a 25% tariff on $30 billion worth of US imports and, 21 days later, will impose the same rate of tariffs on $125 billion worth of US imports.

CCTV mentioned that at a press conference, Trudeau stated that Canada will challenge the US tariffs through the World Trade Organization (WTO) and the "United States-Mexico-Canada Agreement" (USMCA). He noted that if the US continues to impose tariffs, Canada will also consider taking non-tariff measures, though he did not provide details. He also said that they would look for new ways to cooperate with Mexico in response to the tariff issue.

Trudeau expects to hold talks with Trump in the coming days. Addressing Trump, he said that the tariffs are "a very foolish move." He believes that there is absolutely no justification or need for the tariffs, and that the US government has chosen to put American jobs at risk.

According to CCTV, Trump later stated on his personal social media platform that Canada's imposition of retaliatory tariffs would immediately trigger an equivalent increase in US tariffs. Trump's post read: "Please tell Canadian Prime Minister Trudeau that if he imposes retaliatory tariffs on us, our equivalent tariffs will immediately increase by the same amount."

After Trudeau announced that Canada would begin imposing additional tariffs on the US, the decline of the Canadian dollar intensified. The USD/CAD exchange rate once approached 1.4520, rising more than 0.2% within the day. Following Trump's threat, the Canadian dollar fell to its lowest level in four weeks. The USD/CAD exchange rate broke through 1.4540, refreshing the highest level since February 3rd for two consecutive days, with an intraday increase of over 0.4%.

The benchmark index of the Canadian stock market, the S&P/TSX Composite Index, hit a new low in early trading, falling more than 2.6% intraday. By midday, the decline in US stocks narrowed to less than 2%, and after Trump's threat, it was still down by less than 2% for the day.

Earlier on Tuesday, Doug Ford, the Premier of Ontario, Canada, stated that Ontario would impose a 25% tax on electricity exported to 1.5 million households in Minnesota, Michigan, and New York as retaliation against tariffs imposed by the Trump administration. Ford warned that if Trump decides to impose more tariffs on April 2, energy producers in Ontario will completely cut off exports to the United States.

Ford also threatened to stockpile nickel ore intended for export to the US and resell it to other regional markets. "Trump will soon truly realize the importance of our critical minerals," he said.

A month ago, when Trump decided to impose additional tariffs on Canada, the Canadian government had already decided to retaliate with equivalent tariffs on US imports.

According to Xinhua News Agency, on February 1, Trump signed an executive order imposing a 25% tariff on products imported from Mexico and Canada, with a 10% tariff specifically on Canadian energy products. On the same day, Canadian Prime Minister Justin Trudeau announced that Canada would impose a 25% tariff on $155 billion (CAD) worth of US products in response to the US tariffs on Canadian goods.

On February 3, Trump announced a 30-day delay in the implementation of the tariff increase on Canada and Mexico, while continuing negotiations. According to this decision, the relevant tariff increases will take effect on March 4.

According to CCTV News, on Thursday, February 27, Trump stated on social media: "Drugs continue to enter the United States from Mexico and Canada in very large and unacceptable quantities. We cannot allow this situation to continue harming America; therefore, the tariff policy originally scheduled to take effect on March 4 will go into effect as planned." On the 27th, Canadian Prime Minister Trudeau said that Canada does not wish to engage in a trade war with the United States, but if the U.S. imposes tariffs on Canadian goods on March 4, Canada "will immediately respond with extremely strong countermeasures."

After Trump confirmed on Monday that he would proceed with the tariffs on Canada as planned, Canadian Foreign Minister Joly stated on the same day that Canada is ready with a series of immediate retaliatory measures, mentioning that it is prepared to impose retaliatory tariffs on $155 billion worth of U.S. goods.