Canada to Consider Export Tax on Commodities as Part of Trump Tariff Response — Update
2024-12-13
Category: economic

By Paul Vieira and Vipal Monga
OTTAWA--The Canadian government is weighing an export tax on certain commodities to the U.S. if President-elect Donald Trump fulfills his pledge of slapping a 25% tariff on all Canadian imports, according to a person familiar with the matter.
Among the commodities that could be affected are energy products, most notably crude oil, potash and uranium, but no final decision has been made, the person said. Nearly all crude oil exported from Canada is bound for the U.S.
Prime Minister Justin Trudeau said this week that Canada would retaliate against the U.S. should Trump impose a 25% tariff on Canadian imports.
Trudeau said officials are examining the best ways to respond and apply pressure on U.S. lawmakers and business leaders. Finance Minister Chrystia Freeland said Wednesday night that the prime minister and provincial premiers discussed measures that could affect the shipment of critical minerals and some metals to the U.S., without elaborating.
Bloomberg News earlier reported that an export tax on commodities was under consideration.
Trump's tariff threat stems from his concerns that both Canada and Mexico aren't doing enough to limit the flow of migrants and illegal drugs into the U.S.
"This tariff will remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country!" Trump wrote late last month on the Truth Social platform, in reference to his proposed tariffs on Canada and Mexico.
Over 20% of Canada's gross domestic product is tied to trade with the U.S. About three-quarters of Canadian exports are intended for the U.S., led by shipments of crude oil, automobiles and auto parts.
Bank of Canada Gov. Tiff Macklem warned on Wednesday that a 25% tariff would be "highly disruptive" to the Canadian economy, and just the threat is likely prompting businesses to rethink investment plans.
Canada's former chief trade negotiator, Steve Verheul, said on a podcast last week hosted by BMO Capital Markets that senior officials in Ottawa were preparing for the likelihood the 25% U.S. tariff comes into force shortly after inauguration. The Liberal government "is looking at the potential of using export taxes as an additional means to put pressure" on the U.S., said Verheul.
Danielle Smith, the premier of the commodity-rich province of Alberta, said Thursday that an export tax "would be a terrible idea." She added Alberta has no intention of cutting off or thwarting energy exports to the U.S. as part of a broad Canadian retaliation.
Ontario Premier Doug Ford said this week he would be willing to cut off electricity exports to northeastern U.S. as part of a trade row.
Write to Paul Vieira at paul.vieira@wsj.com and Vipal Monga at vipal.monga@wsj.com