U.S. President Donald Trump spared Canada from another layer of punishing tariffs Wednesday as he escalated his trade war against the rest of the world, while extending indefinitely the carve-out for Canadian goods moving through the North American trade pact.

A lasting, but partial, reprieve

Neither Canada nor Mexico made the list of countries to be hit with individualized reciprocal tariffs that Trump unveiled with the fanfare of a game-show host on his promised “Liberation Day.” The White House said the fentanyl-related tariffs on both those countries remain in place, but so does the partial reprieve Trump granted last month.

That includes a carve-out for goods that go through the United States-Mexico-Canada Agreement (USMCA). U.S. trade data shows about 38 per cent of total Canadian exports to the U.S. went through the trade deal last year. Since World Trade Organization rules allowed most Canadian exports to enter the U.S. with low or non-existent duties, many businesses did not bother to complete the paperwork needed to prove compliance. Many have since been scrambling to go through that process. Those efforts are likely to increase now that the U.S. is allowing the exemption to stay—while still keeping the 25 per cent duty on anything outside it. The lower 10 per cent levy on non-USMCA Canadian energy products and potash, a key ingredient in fertilizers, also remains in place.

If Trump decides to end the fentanyl-related tariffs, then non-compliant USMCA goods will face a 12 per cent duty. Anything moving through USMCA, which is set to be reviewed by July 2026, will not face an additional tariff. Trump did not share these details in his speech in the Rose Garden, although he did repeat previous grievances against Canada.

Auto tariffs still on

While his announcement left Canadians in many sectors breathing easier, Trump confirmed that 25 per cent tariffs on light-duty vehicles imported to the U.S. will take effect on Thursday. As a result, noted Cory Renner, associate director of economic forecasting at Conference Board of Canada, celebrations will be limited for automaking hubs like Windsor, Ont., which will be “hit hard.” The executive order for the vehicle tariffs also applies to major parts like engines, transmissions and electrical components by May 3. 

Auto levies could add up quickly, given how many Canadian parts end up in American vehicles. TD Economics has estimated that vehicles make up nearly 15 per cent of the country’s southbound shipments, and auto parts alone are four per cent of total Canadian trade with the U.S.

David Adams, president and CEO of Global Automakers of Canada, said in a statement that the auto tariffs will still raise the cost of vehicles, adding that political leaders must “think carefully” about how to respond, with a focus on “stability and maintaining competitiveness while minimizing unintended consequences.”

Trump versus rest of the world

Canada’s day of relative reprieve was one of pain for scores of other nations. Trump invoked emergency powers to bring in a 10 per cent tariff on all countries, which the White House characterized as a response to a “national emergency posed by the large and persistent trade deficit” linked to unfair trade practices. That will take effect at 12:01 a.m. EDT on Saturday. 

Some of those countries will face higher duties he calls reciprocal tariffs. Trump said those amounts were determined by calculating what his administration considers to be the total number of trade barriers imposed on the U.S., including non-monetary measures, then cutting it in half. The chart he held at the podium showed amounts that did not strictly adhere to that formula. 

The White House said those tariffs will take effect on April 9 at 12:01 a.m. EDT and remain in effect “until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.” 

Reciprocal tariffs, explained

Trump announced in February that he would impose tariffs to counter trade measures other countries have set up against the U.S.—a wide-ranging definition that includes subsidies, red tape and “unfair, discriminatory, or extraterritorial taxes.” The White House singled out Canada’s three per cent digital services tax as an irritant. It was not mentioned in the executive order published Wednesday. The scope and the details have shifted over time, which has increased uncertainty for businesses. 

Canada’s response

Liberal Leader Mark Carney, in his capacity as the sitting prime minister, said he’d convene a meeting with the premiers Thursday morning and would deliver Canada’s response after that.

Canada already has counter-tariffs on nearly $60 billion worth of U.S. products in place, and Carney warned Trump last week he was ready to step up the country’s response. Under former prime minister Justin Trudeau, Ottawa had planned another wave of counter-tariffs on $125 billion worth of U.S. goods, then delayed implementing them after Trump granted the partial reprieve. Cars and trucks, plus many of their parts, were on that list. That was before Trump announced the 25 per cent tariffs on vehicles. 

This week, Carney seemed open to narrowing down the proposed countermeasures. “We will not disadvantage Canadian producers and Canadian workers relative to American workers,” he said Tuesday in Winnipeg.

On the campaign trail

“In a crisis, it’s important to come together, and it’s essential to act with purpose and with force,” Carney said Wednesday evening. The lack of new measures targeting Canada means preserving important parts of the economic relationship, he said. But the existing tariffs remain in place, new ones are about to hit the auto sector and Trump has signalled that more are coming to cover pharmaceuticals, lumber and semiconductors.

Furthermore, the new tariffs on countries Trump hadn’t previously targeted will change the global economy, Carney said. “President Trump has just announced a series of measures that are going to fundamentally change the international trading system,” he said. They’ll affect the United States, increasingly seriously as time goes on, and will affect millions of Canadians, Carney said.

Conservative Leader Pierre Poilievre addressed Trump’s action briefly just after taking the stage at a rally in Kingston, Ont.

“The president is betraying America’s closest friend and attacking our economy, proving once again that Canada must end its era of overdependence and weakness,” he said.

A Conservative government “will push hard to put an end to these tariffs and get a quick but fair deal that protects our sovereignty, knocks down all the tariffs and allows us to rebuild our military so that we can be a true sovereign nation,” he added.