In response to President Donald Trump's confirmation on Tuesday that his administration will proceed with levies against Canada and Mexico, the Canadian government unveiled a comprehensive set of counter-tariffs against the US.  

“Canada will not let this unjustified decision go unanswered,” said the statement from Prime Minister Justin Trudeau late Monday. The retaliatory strategy is similar to the one he unveiled in February following the signing of Trump's executive order imposing wide tariffs. Canada will impose a 25% tariff on about C$30 billion ($20.6 billion) worth of goods from U.S. exporters. These tariffs will take effect at 12:01 a.m. New York time unless the U.S. removes its own tariffs, Prime Minister Trudeau said.

Three weeks later, a second round of 25% tariffs will be applied to C$125 billion worth of additional products, including major items like cars, trucks, steel and aluminum. “Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” said Trudeau. 

The retaliation was anticipated after Trump stated earlier that Canada and Mexico could not escape the broad tariffs he had been warning about since his election in November. This trade war will impact one of the biggest trade relationships in the world, valued at over $900 billion in goods and services each year. Canada is the biggest buyer of U.S. goods, just as the US is the biggest buyer of Canadian goods. The Canadian dollar and stock market dropped, with the S&P/TSX Composite Index falling 1.5%, its biggest drop since December 18. Traders now see an almost 80% chance that the Bank of Canada will cut interest rates by 0.25% on March 12, up from about a 50-50 chance before.

On February 1, Trump signed an executive order imposing a 25% tariff on most goods imported from Canada and Mexico, along with a 10% tariff on Canadian energy products like crude oil, natural gas, and uranium.

The Bank of Canada has cautioned that a protracted tariff battle may "wipe out growth" over the next two years and reduce Canadian GDP by over 3%. Customers and businesses would spend less, exporters would reduce output and jobs, prices for US-imported goods would increase and demand for Canadian goods in the US would decline. Trudeau, who will be leaving office in a few days, returned on Monday from a trip to London, where he met with other leaders, including UK Prime Minister Keir Starmer. “Businesses on both sides of the border have already been damaged by the uncertainty coming from President Trump’s drip-drip-drip of tariff threats,” Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, said in a statement. “We will have a long road back to Canada and the US being trusted economic partners again. Businesses can’t just switch their whole model to avoid tariffs and then go back again, depending on what politicians decide on any given day,” he added.

Trump's executive action claimed that Canada allows too much fentanyl to enter the U.S. through the border. However, Canadian officials argue this isn’t true, pointing to U.S. government data showing that less than 1 percent of the fentanyl seized by U.S. border agents comes from the northern border. In response, the Canadian government introduced a C$1.3 billion plan to strengthen border security. This includes adding more aerial surveillance with helicopters and drones. The plan also proposes creating a new joint “strike force” in North America to fight the fentanyl trade. Additionally, Prime Minister Trudeau has appointed a special fentanyl czar, increased border patrol personnel, and promised further measures to combat organised crime. Canada's provinces are also ready to respond to the US.

“A tariff on Canada is a tax on Americans,” Ontario Premier Doug Ford said at a mining convention in Toronto on Monday. “If they’re going to try to annihilate Ontario, I will do everything — including cutting off their energy — with a smile on my face. I’m encouraging every other province to do the same.” Ontario and other provinces have pledged to restrict or exclude US companies from government contracts.

Premier Doug Ford reaffirmed his decision to cancel Ontario's contract with Starlink, the satellite network owned by Elon Musk. Additionally, he issued a new warning, stating that he might stop exporting nickel to the US. “It will shut down manufacturing because 50 per cent of the nickel you use is coming out of Ontario,” the provincial leader said in an interview with NBC News. Canadian cabinet ministers, provincial premiers, and other policymakers have been traveling to Washington frequently in recent weeks. Their goal is to discuss border issues and persuade U.S. lawmakers and members of Trump's team not to impose tariffs.

According to Joly, government representatives have had positive discussions with Trump administration officials. However, she acknowledged that "we will be dealing with a level of unpredictability and chaos that comes out of the Oval Office." There is "no question" that tariffs will hurt the Canadian economy, according to remarks made earlier Monday by Immigration Minister Marc Miller. “We will have to bring the fight and it will hurt Americans as well. It’s important to reiterate that 35 of those states, their primary trading partner is Canada, so it will hurt them. And we hope the logic will prevail.”