OTTAWA — U.S. President Donald Trump made good on his threat to slap steep universal tariffs on Canadian goods one minute after midnight Tuesday, sparking a trade war between the longtime trading partners and allies.

‘No justification’

“Let me be unequivocally clear–there is no justification for these actions,” Prime Minister Justin Trudeau said in a written statement Monday evening as the deadline drew nearer with no sign of a deal from Trump. The president had said earlier in the day there was “no room left” to avoid the tariffs. Trump has linked to the fentanyl crisis in the United States, although there is no data to support his claim that the drug is moving across the northern border in any meaningful volume, especially when compared to Mexico.

The tariffs—25 per cent on all Canadian goods aside from energy products, which are subject to a 10 per cent levy—came into effect at 12:01 a.m. EST, according to the implementation notice entered into the U.S. Federal Register on Monday. That deadline marked the end of a 30-day reprieve Trump had granted both Canada and Mexico, which he hit with blanket 25 per cent tariffs, the day before the measures were first set to take effect Feb. 4.

Canada’s retaliation

Trudeau said Canada would immediately move ahead with a plan to retaliate that Ottawa had first announced on Feb. 1: immediate counter-tariffs of 25 per cent on $30 billion worth of American products such as orange juice, wine and cosmetics. A second wave of tariffs on $125 billion worth of goods such as electric vehicles and steel and aluminum products is set to come after a 21-day consultation. Canada paused both phases after Trump granted a 30-day reprieve.

“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau wrote in his statement.

He was scheduled to hold a news conference Tuesday on Parliament Hill at 10:30 a.m. EST, alongside Finance Minister Dominic LeBlanc, Foreign Affairs Minister Mélanie Joly and Public Safety Minister David McGuinty.

Double the pain

Trudeau noted the tariffs will hurt the American economy, too, and that both countries already have a free trade deal, the United States-Mexico-Canada Agreement, which was meant to avoid such pain and disruption. He also noted that less than one per cent of the fentanyl seized at U.S. borders comes from Canada.

“Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas, and cars, and potentially lose thousands of jobs,” he said in his statement. “Tariffs will disrupt an incredibly successful trading relationship. They will violate the very trade agreement that was negotiated by President Trump in his last term.”

China, which was hit with fentanyl-related tariffs of 10 per cent last month, got an additional 10 per cent. That country had already retaliated with extra duties on some U.S. products, including coal, liquefied natural gas and crude oil. It has also placed export controls on several critical minerals. 

On Tuesday, Beijing announced it would impose tariffs of up to 15 per cent on some U.S. goods, mainly agricultural products such as corn and soybeans. It is also restricting exports to 15 U.S. companies.

Dennis Darby, CEO of Canadian Manufacturers & Exporters, said a strong reaction from Canada could upset American consumers, which would then catch the attention of Trump. “Ultimately, how disruptive this ends up being for American stakeholders and consumers is probably the only measure that matters,” he said Monday.

Market reaction

As it became clear the tariffs were going ahead, North American markets went into a tailspin. The Dow Jones Industrial Average, the S&P 500 and the S&P/TSX Composite Index were all down by about two per cent by late afternoon on Monday, with the Dow down about 900 points.

“Today’s reckless decision by the U.S. administration is forcing Canada and the U.S. toward recessions, job losses and economic disaster,” Candace Laing, president and CEO of the Canadian Chamber of Commerce, said in a statement sent Tuesday morning.

She called on the Trump administration to reconsider the move. She also urged Canada to get on with shoring up its own economy, praising recent moves to reduce barriers to interprovincial trade as good first steps. “What we do in this moment can’t be incremental, it must be transformational. To build a resilient, self-reliant and future-proof economy, we need to diversify our trade partners, revamp the tax and regulatory system, and do even more to streamline internal trade,” she added.

Bit of breathing room

On Sunday, the White House amended its Feb. 1 executive order on the northern border to allow Canada to keep its “de minimis” exemption—for now. The de minimis rule allows goods worth less than US$800 to enter the United States duty-free, which is heavily relied upon by Canadian e-commerce companies doing direct-to-consumer sales below the border.

The U.S. was initially set to eliminate Canada’s de minimis exemption as soon as the tariffs took effect. Now it will stay until the commerce secretary tells the president “adequate systems are in place” to collect revenue on low-value shipments entering the country.

Narrow exemptions

The implementation notice says “informational materials” are exempted from the broad-based tariffs. This includes “publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds.” The law shields those items from presidential authority. 

There is also an exception for “donations” such as food, medicine or clothing “intended to be used to relieve human suffering,” although the implementation notice says it would not apply if these items got in the way of the president’s ability to deal with a national emergency or would endanger the U.S. military.

Still on the horizon

On Saturday, Trump directed the U.S. Commerce Department to begin investigating national security harms linked to lumber imports and whether measures such as tariffs or quotas would help. The executive order launching the review does not mention Canada, but does refer to a long-standing trade irritant between both countries: softwood lumber.

In Canada, prices to harvest timber on government-owned land, known as stumpage, are set administratively. U.S. producers must pay market rates, so the U.S. considers the Canadian system to be an unfair subsidy. The U.S. already increased combined duties on Canadian lumber to 14.54 per cent last August, a big jump up from the previous level of 8.05 per cent.

On Monday, the Commerce Department proposed a new anti-dumping duty of 20.07 per cent on Canadian softwood lumber, a significant increase from the current rate of 7.8 per cent.

Canada is facing several other tariff threats from the U.S., including a 25 per cent levy on steel and aluminum products set to come into effect March 12, which the federal government understands would be on top of the tariffs related to fentanyl.

This story was updated to include the passage of the midnight tariff deadline, quotes from the prime minister’s statement and other details