As Donald Trump gets set to return to the White House next week, one expert says the U.S. president-elect isn’t likely to back down on his proposed plan to impose sweeping tariffs on imported goods from Canada.
Greg Valliere, chief U.S. policy strategist at AGF Investments, told BNN Bloomberg that he believes Trump will follow through on his threat to levy 25 per cent tariffs on Canadian imports within his first few days in office, despite a recent report that the administration may ease them in over time.
“The one thing Trump worries about is to look weak. He wants to look strong. If he came up with something a little milder, he could get a lot of criticism that he backed down, which he doesn’t want,” he said in a Wednesday interview.
“So, I think he probably will go for something very close to the 25 per cent, maybe even more.”
Earlier this week, Bloomberg News reported that members of Trump’s economic team were discussing a plan to “slowly ramp up” tariffs by about two to five per cent a month, rather than imposing the steep levy all at once, as Trump has proposed.
The plan was in its early stages and had not yet been presented to Trump himself, according to Bloomberg. The president-elect’s transition team has since “aggressively” denied such reports of a more measured tariff rollout, Valliere said.
‘War of retribution’
Valliere said that while some experts have suggested Trump may opt to carve out exemptions for certain Canadian goods or products entering the U.S., such as energy, his main objective is to “make a big splash” during his first days back in office.
“He’s been boasting that he’s going to get tough, and I think he will… I do think that there will be significant tariffs, at least 25 per cent, on Canada,” he said, adding that if they are imposed, it will likely lead to Ottawa retaliating with its own tariffs on imported U.S. products.
“I do think there will be retaliation… (Prime Minister Justin Trudeau) and others are putting together a list (of ways) the Canadians would retaliate, so this could be a war of retribution back and forth, back and forth.”
Valliere noted that Canada is just one of a number of countries Trump has threatened to target with tariffs, including China, and its southern neighbour Mexico.
“There’s (also) potential problems with Panama and with Greenland, so we’re in for a rocky stretch right now,” he said.
Inflationary impact of tariffs
Valliere said Trump’s proposed Tariffs, however they’re ultimately implemented, will be a “dominant issue” in American and global economics going forward, particularly for how they relate to U.S. consumer inflation, a top issue Trump campaigned on fixing.
“In many parts of the U.S. there’s a labour shortage. So, if we start doing things like expelling illegal immigrants, if we do things like tariffs… I think a retaliatory war in this area would lead to more inflation, absolutely,” he argued.
Meanwhile, Trump’s plan to ease inflation by reducing government spending is not realistic, Valliere said, since there are no big expenditures that the incoming administration would actually be willing to cut.
“It can’t happen. They’ve been talking a good game for the last few months of how they can radically cut spending – it can’t be done. The only way you radically cut spending is to cut social security and Medicare,” he said.
“And there would be an uproar in America if we tried to cut these things, so they can nibble around the edges, there can be a cut or two in spending, but the really big, big items that would make a difference can’t be touched.”
With files from Bloomberg News