Canada's Finance Minister Dominic LeBlanc said late Thursday that tariffs are harmful to both the United States and Canada, adding that moving forward with dialogue is crucial.
Key quotes
It was a long discussion.
Tariffs are harmful on both sides of the border.
There is a chance for a reset here.
There is a mutual understanding that there is an impact on both sides of the border.
Moving forward with dialogue is crucial.
The US side understands.
We talked about making North America more competitive.
We talked about a reset with a new Prime Minister tomorrow.
We changed the channel in my view in looking at opportunities and competition in North America.
Market reaction
At the time of writing, the USD/CAD pair is trading 0.09% lower on the day to trade at 1.4428.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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