Why the United States – China's tariff pauses may show “good news” to Canadians – Country
With news of a 90-day trade armistice between China and the United States, some stakeholders are cautious about what this means for the Canadian economy and consumers.
“Canadian industries have been sensationalized by the trade war … At present, any downgrade is good news for global trade,” the Canadian Chamber of Commerce said in a statement on Global News.
“We will closely monitor China’s discussions over the coming months, as details of any final agreement will be important.”
“This development is welcome, but we have not yet popped up the champagne,” the Canadian Retail Commission added in a statement.
“The U.S. continues to cause huge damage to its 30% tariff, only for U.S. businesses and consumers, and for global supply chains that are already facing significant damage,” the commission said.
What has changed in the trade war?
On Monday, U.S. President Donald Trump and Chinese officials announced plans to reduce tariffs by 90 days.
The U.S. agreed to lower its 145% tariff on Chinese goods by 115% to 30%, while China agreed to lower its interest rate on U.S. goods to the same 10%.
Trump called Monday's trade announcement “all reset with China.”
In the short time when the 145% tariff is imposed, it is difficult for businesses to operate normally many seek alternatives or stop goods altogether.
The news follows a weekend development after China and the United States met in Geneva.
“The consensus between the two delegations is not expected to be cancelled this weekend,” said U.S. Treasury Secretary Bessent.
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“We want trade to be more balanced, and I think both sides are committed to achieving that.”
While optimism about the trade war may have put stock markets into Monday's green, including Canada, it also acts cautiously.
“This should not be confused with our progress in December 2024,” said Peter Morrow, an economics professor at the University of Toronto.
“We should think of it as 'thing is not as bad as it was a month ago.'”
How much progress has been made?
Despite the ease of stock markets, the long-term outlook remains very unpredictable.
Investors buying stocks on Wall Street and other markets on Monday may feel that if Trump is willing to negotiate tariffs, then maybe the economy will not fall into a recession after all.
“There is still a lot of uncertainty. ” Moro said.
“In the past few months, we've seen a sharp spin on tariff levels. In a sense, we've just delayed uncertainty in 90 days.”
What does this mean for Canada?
Economists and businesses are concerned that U.S. tariffs on China could lead Chinese companies to raise prices, affecting the prices of goods sent to Canada by Canada.
This is especially true for the dollar store.
There are also potential ripple effects for Canadian consumers, which could mean paying higher prices for certain commodities and continuing uncertainty about what will happen next.
The development could also raise questions about whether Trump is willing to negotiate tariffs, and Prime Minister Mark Carney also hopes to reach an agreement with the U.S. government to get Canada issued tariffs.
“I think he (Carney) has a chance to see it as some of the trouble the Trump administration is aware of them,” Morrow said.
“Carney can say, well, the Trump administration wants to have an outside…want to declare a political 'victory' and make a deal that changes too much. But if you let Trump declare a victory, you both can walk away with minimal damage.”
Meanwhile, the United States and China are still in a trade war, but tariffs have been greatly reduced by 90 days.
The situation between Canada and the United States has not changed yet, and the two countries still impose a 25% tariff on all imported non-CUSM-compliant products (Canada United States Mexico Agreement), additional tariffs on aluminum and steel products, and smaller taxes on energy imports to the United States
Although Carney has said he wants to remove the tariffs as soon as possible, Canadian businesses are still saying they need relief now.
“We are encouraged by the recent efforts of the New Canadian government in Washington, but we recognize that it may take time to resolve the Canadian-U.S. tariff dispute. Meanwhile, the damage is underway. ” said the Canadian Retail Council.
“We urge the government to prepare to strengthen support in the context of a long-term economic downturn.”
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