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U.S. President Donald Trump ‘s April 2 date for the imposition of reciprocal tariffs on all U.S. trade partners is quickly approaching. But what Canada can expect for what the president has called “Liberation Day” remains unclear.

U.S. Treasury Secretary Scott Bessent has said that the U.S. will approach countries with a specific number.

“On April 2, each country will receive a number that we believe represents their tariffs,” Bessent said in an interview. “For some countries, it could be quite low, for some countries it could be quite higher.”

Bessent said the U.S. would also unpack its areas for concern with each country, which could include high tariffs as well as “non-tariff barriers, currency manipulation, unfair funding (and) labour suppression.”

The Wall Street Journal, reported Sunday that separate sector-specific tariffs — such as the threatened 25 per cent tariffs on autos and potential tariffs on lumber — would be delayed beyond April 2.

What’s on the table for reciprocal tariffs?

Reciprocal tariffs could go into effect almost immediately on April 2 using the president’s emergency economic authority, reported The Wall Street Journal.

Joseph Steinberg, an associate professor in the University of Toronto economics department, said that while there is no clear picture yet of what the reciprocal tariffs might be, non-tariff trade barriers are certainly in play.

“Generally speaking, non-tariff barriers are any economic policies that inhibit trade that are not explicit tariffs,” Steinberg said.

Canada’s digital services tax (DST) is likely fair game, having been a contentious issue even before the Trump administration took over this year.

However, the White House is also considering value-added taxes (VATs) that would reportedly include Canada’s goods and services tax (GST) . The GST applies to both domestic and foreign goods and isn’t specific or discriminatory to the U.S., but Steinberg said the Trump administration is claiming it is discriminatory because Canadian exports to the U.S. don’t have to pay it.

Trump has further claimed American banks aren’t allowed to do business in Canada, which could present grounds for reciprocal tariffs as well.

“U.S. banks are allowed to operate in Canada,” Steinberg said. “They just choose not to, because the banking regulations that we have are stringent, and so it just doesn’t seem to be that profitable for U.S. banks to open at least retail operations.”  Canada’s dairy supply management system could also face reciprocal tariffs, as Trump has declared Canada charges over 200 per cent levies on U.S. dairy products. But these tariffs only apply to imports that exceed a set maximum under the Canada-United States-Mexico Agreement (CUSMA) .

For example, according to the 2025 customs tariff schedule, Canada charges 7.5 per cent tariffs on some milk and cream products “within access commitment,” meaning these imports lie within a set quota. If this quota is exceeded, the tariff is raised to 241 per cent.

Steinberg said the bigger point of contention here is that some dairy imports come with lower quota levels than others, which means there are tighter restrictions on how much the U.S. can supply at lower tariff levels.

The higher import quotas are typically aimed at “upstream dairy products” that haven’t been processed yet, like raw milk for example. Steinberg believes American dairy producers want more market access by raising the quotas for processed dairy products like cheese and yogurt.

But Claire Fan, senior economist at Royal Bank of Canada (RBC) , said Canada currently runs a dairy trade deficit with its southern trading partner.

“Under CUSMA, there have already been concessions made on that front,” Fan said. “U.S. dairy exports to Canada have grown from $730 million to about $1.14 billion.”

Could Canada come up with a deal to avoid reciprocal tariffs?

If Canada and other countries were to curb what the Trump administration perceives as “unfair” trade practices, Bessent said the reciprocal tariffs will not go into place.

“Going into April 2, some of our worst trading partners in terms of the way they treat us have already come to President Trump offering substantial decreases in very unfair tariffs,” Bessent said, adding that he’s “optimistic” some tariffs may not come to pass if other countries negotiate deals.

Steinberg said there are potential options for Canada to make concessions, like eliminating or reducing the DST, which is the most likely scenario, or negotiating softwood lumber prices . In the case of dairy supply management, Steinberg said Canada could either increase its quota for some imports, or redistribute it to include a broader range of dairy products.

In other cases, it’s not quite so cut and dried.

“I don’t see any way that the Canadian government is going to reduce or eliminate the GST, as I just don’t see that as something that’s going to be in play,” Steinberg said, adding that Canada would need to raise this tax revenue elsewhere, by increasing income taxes for example.

How might the U.S. calculate this figure?

The Wall Street Journal reported that the White House previously considered grouping trading partners into three tiers of high, medium and low tariffs, but moved away from this plan and will instead be providing each targeted country with its own custom tariff number.

Steinberg said the U.S. administration would be undertaking a massive project to break down how much each country owes to determine a weighted average. The math is further complicated by adding non-tariff trade barriers to the mix and calculating an equivalent for something like a DST or GST.

Fan predicted reciprocal tariffs could range within the low to moderate scale for Canada.

Steinberg agreed, noting that from a purely economic perspective, Canada should fall into the lower tariff range — but that it has become a major target since Trump returned to the White House.

“It is likely that these reciprocal tariffs are going to mix cold, hard economics with strategic objectives,” Steinberg said. “Canada could be low; it could be medium. I think it’s unlikely that Canada would be put in the highest (range for reciprocal tariffs).”

What could Canada’s reciprocal tariff number be?

It’s still unclear how high tariffs could go.

Bloomberg reported on Sunday that other existing tariffs, such as on steel, might not be cumulative, which would drastically reduce the impact on those specific sectors. Officials also suggested the paused blanket tariffs on Canada and Mexico (which the U.S. tied to the flow of fentanyl across the border) could be axed entirely and replaced with reciprocal tariffs.

A February study from Yale University’s Budget Lab indicated that Canada could experience the lightest hit from reciprocal tariffs compared to other countries, estimating tariff rates on Canada could climb by 4.59 percentage points.

Steinberg previously told Financial Post that he couldn’t see the U.S. imposing reciprocal tariffs of more than three or four per cent on Canada, but now he said that figure “could certainly be higher” since it’s clear the Trump administration is adding non-tariff trade barriers to the mix.

“It’s hard to tell how large the average is (since), at the end of the day, when we retaliate, we tend to retaliate dollar for dollar,” Fan said. “What that means is, essentially, you match the overall import or export volume here, as opposed to the percentage itself.”

In that case, Canada is unlikely to face a sweeping tariff of, say, 200 per cent, since some of the trade barriers the U.S. is targeting make up a small fraction of their overall trade, Fan said.

Still, Steinberg is skeptical that the White House will have completed all of its calculations in time for the April 2 deadline.

He believes it’s far more likely the Trump administration will present each country with some preliminary data and begin with applying reciprocal tariffs based on each country’s respective levies. In a month or two months’ time, the U.S. could set more tariffs based on other trade barriers, he said.

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• Email: slouis@postmedia.com

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Canadians will head to the polls on April 28 after Parliament was dissolved on Sunday, triggering a snap election . The vote comes as trade threats and challenges to Canadian sovereignty from United States President Donald Trump have reshaped the political landscape, with the campaign now expected to focus on who is best able to handle Trump and build a more resilient economy.

Liberal Party Leader Mark Carney and Conservative Party Leader Pierre Poilievre both made pre-election moves on the economic front last week, with Carney eliminating the Liberals’ proposed capital gains tax changes and Poilievre promising “shovel-ready zones” for major infrastructure projects.

If these announcements are any indication, deregulation and policies that aim to foster growth will dominate the campaign trail over the next five weeks. Here’s a look at those and other major economic issues Canadians should expect to hear more about in the coming weeks:

The trade war

Whoever becomes the next Canadian prime minister will have to contend with Trump and Canadian voters will be looking at who is best suited to handle the unpredictable president.

The U.S. administration is set to impose reciprocal tariffs on all countries on April 2, and it isn’t clear if goods covered by the Canada-U.S.-Mexico Agreement (CUSMA) will remain exempted from tariffs beyond that date. The mid-campaign deadline is sure to inject drama into the race — if tariffs are imposed , there could be immediate economic fallout to address, in addition to the longer term need to reduce reliance on the U.S.

Trump has also expressed his intention to renegotiate CUSMA with an eye to what he views as major trade irritants, including Canada’s supply management system, the digital services tax and even the Canadian auto industry. The next prime minister will be at the negotiating table and voters will be looking for the candidate that can deliver the best deal for Canada, while also presenting ideas for how the country can best diversify its trade opportunities outside of its largest trading partner. Both Poilievre and Carney have vowed to stand up to Trump.

Energy and infrastructure projects

The trade tensions with the U.S. are also prompting a renewed interest in getting major energy projects built. Last Wednesday, oilpatch executives signed an open letter asking Ottawa to declare an energy emergency and designate key projects within the national interest, so they can be built faster.

The U.S. remains the primary destination for Canadian crude oil, but more pipelines and energy projects could diversify Canada’s oil export destinations and reduce our dependence on the U.S. There are also calls to make Canada competitive in liquefied natural gas (LNG): currently we have no operational LNG export terminals, but several projects are in the works.

In the context of the trade war, Canada will need to lean into its energy sector and its competitiveness on a global scale. Part of that will include getting projects built that diversify Canada’s energy exports. Candidates will not be able to avoid having this discussion and the ways it intersects with the candidate’s climate policies will be closely watched.

Carney, in his brief tenure as Prime Minister, announced the government would scrap the consumer carbon tax, but committed to maintaining an emissions cap, a policy the energy producers argue will hamper growth in their sector. Poilievre, meanwhile, has promised to eliminate the industrial carbon tax, repeal Bill C-69 also known as “the no pipelines bill” and create “shovel ready zones” for major resource and energy projects.

Innovation and economic competitiveness

Canada’s GDP-per-capita , a measure indicative of the standard of living, has been trending downward. In 2024, GDP-per-capita fell by 1.4 per cent after declining by 1.3 per cent in 2023. While the decline has in part been a result of population growth outpacing economic output, the country’s poor productivity numbers combined with low business investment, are signs of an economy that is struggling to remain competitive.

A full blown trade war with the U.S. is expected to exacerbate this trend, with the Bank of Canada estimating Canada’s business investment could decline by 12 per cent. In response, Poilievre has promised tax cuts to spur investment and innovation and Carney has promised to boost big infrastructure projects and update transportation links.

The removal of internal trade barriers between the provinces are also likely to feature prominently in the candidates’ platforms. Poilievre has promised to push further on bringing down more barriers, promising to work with provinces to harmonize health and safety regulations, so those in the skilled trades do not have to recertify themselves when they decide to work in another jurisdiction.

The Liberal government has removed a number of federal exceptions from the Canadian Free Trade Agreement, and Carney said Friday following a meeting with the premiers that Ottawa would aim to remove as many federal barriers to free trade as possible by Canada Day.

Affordability and housing

Affordability continues to be a topic of top concern for Canadian voters. Even though inflation has returned near the Bank of Canada’s target in recent months, the cost of living has risen significantly since before the pandemic.

There is also renewed concern that a trade war will drive up costs. Carney and Poilievre both launched their campaigns by promising middle-class tax cuts . Carney promised to cut the marginal tax rate on the lowest income bracket by one per cent. The Liberal Party says this tax cut will save two-income families up to $825 a year. Poilievre promised to drop the tax rate on the lowest income tax bracket from 15 per cent to 12.75 per cent, a move the Conservative Party says will save two-income families $1,800 a year.

Another important issue is housing, which will be on top of any affordability promises this election. A long-standing issue for Canadians, but especially in vote-rich regions of the country.

While all levels of government have tried to address this problem, the Canada Mortgage and Housing Corporation estimates Canada needs to build an additional 3.8 million homes by 2030, to restore affordability.

While a trade war has chilled Canada’s housing market in recent months, Canada’s average house price remains elevated at $668,097, according to the Canadian Real Estate Association. During an announcement last week, Carney promised to cut the GST on new homes valued under $1 million for first-time homebuyers, similar to a promise Poilievre made last October, which would remove the GST for new homes under $1 million.

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• Oilpatch CEOs call on Ottawa to declare energy crisis
• Poilievre promises deeper income tax cut than Carney

Government spending

The size of the federal government and the public service grew significantly under the Trudeau government over the last 10 years. The fall fiscal update put the federal government’s deficit at $61.9 billion for the 2023-2024 fiscal year, with a deficit projection of $48.3 billion in 2024-2025 and $42.2 billion in 2025-2026. The federal government is on track to stick to two of its three fiscal guardrails, with the debt-to-GDP ratio set to be 42.1 per cent for 2023-2024 and decline to 41.9 per cent the following year.

Poilievre and Carney have both said they would like to see government operating costs decline, with both promising to shrink the size of the federal workforce. Carney raised some eyebrows when he said he would present a new way of crafting the federal budget, by putting the government’s capital and operational spending into two separate budgets. This method has already faced criticism, with Poilievre accusing Carney of trying to “cook the books.”

Poilievre has promised not to make big changes to equalization programs, but says he will “spell out” proposed spending cuts in his platform, with the leader previously committing to eliminating bureaucracy and consultants, and cutting foreign aid. With the trade tensions set to affect businesses and workers across the country and many looking to Ottawa for assistance, any plans to cut spending are certain to be closely scrutinized.

• Email: jgowling@postmedia.com

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