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The trade community quickly reacted Tuesday to the news that President Trump is set to impose 50% tariffs on an array of Canadian goods. While there's hope that cooler heads could prevail before the rules take effect, there's little optimism after 17 months of a tense relationship between the US and Canada.
"Businesses should treat them as a credible possibility," Andrew Siciliano, head of trade at KPMG, said in a note to Yahoo Finance. He's telling companies to immediately improve their position the best they can. But he acknowledged that "thirty days is a very short timeframe in supply chain planning."
Ted Murphy, an international trade lawyer at Sidley Austin, said in a note to clients that talks could avert new duties but "given the state of U.S.-Canada trade relations, I am not sure I would bet on it."
Trump signed three presidential proclamations on Monday to register White House objections to Canadian actions around automobiles, alcohol, and dairy products. In response, he announced the 50% tariffs on a variety of goods but with a stipulation that they won't go into effect for 30 days.
The Trump team said they're willing to talk with Canada, but no formal meetings are currently on the books. It's also unclear whether Monday's surprise move — based on a never-before-used provision of Section 338 of the Tariff Act of 1930 — will stand up in court.
Joyce Adetutu, an international trade lawyer at Vinson & Elkins, noted that Trump has shown willingness to negotiate both before and after harsh new tariffs are imposed.
As such, potentially impacted businesses need to be prepared for short-term costs, but "it may not be critical at this juncture to reconsider supply chain entirely pending further discussions."
This move marks a new level of rupture and could be especially disruptive as these tariffs are set to apply even to goods that were previously exempted under the US-Mexico-Canada Agreement (USMCA).
"Canada's been very, very tough on us over the years," Trump added Tuesday in the Oval Office. He criticized Canada's leadership and claimed, "They need us to survive."
The president added that even more Canadian tariffs could be coming in the weeks ahead in response to smoke from recent wildfires.
No timeline for further talks
Both Washington and Ottawa have made it clear that it's a stalemate for now.
Canadian Prime Minister Mark Carney said the country is ready to engage with the US in his official response. He noted that Canada is looking to "modernize" the USMCA trade pact to try and address one complaint from Trump.
But he announced no plans for talks and could only say "we stand ready to intensify those discussions in the coming weeks."
A senior Trump administration official added on Monday that there have been informal contacts, but there's no timeline for formal discussions.
The official added that the team is confident that Trump's legal authority to impose these tariffs would stand up in court. Section 338 hasn't been used for this purpose before, but "in our view, the terms are clear."
The contrast is stark between America's northern and southern neighbors. Face-to-face talks are on the docket with Mexico, with US Trade Representative Jameison Greer set to travel to Mexico City later this week.
The core of the tension between US and Canada appears to be that the latter was one of two countries (China being the other) to retaliate against Trump's tariffs with duties of their own.
Carney signaled little willingness to compromise there, saying in his statement that it was Trump who first violated the USMCA deal and his response "has merely matched those measures."
Stephen Brown, the chief North America economist at Capital Economics, added in his analysis that considerable uncertainty remains but that Trump could be motivated to try and make these new tariffs stick.
He noted that if this new tariff authority is implemented and upheld in courts, it "would help the administration regain some of the flexibility it lost" in February when the Supreme Court struck down Trump's blanket tariffs.
In a recent note, analysts at Raymond James offered a reminder to their clients.
"While the specific legal tools used to impose tariffs may change, the overall direction of U.S. trade policy remains the same of maintaining elevated tariff rates .... to recreate as much of the former reciprocal tariff framework as possible," they wrote.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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