How Canada could hit back to hurt the US economy - and Trump

Canada possesses considerable leverage in its ongoing trade dispute with the United States, as nearly 70% of Canadian exports go to its southern neighbor, which is the world's largest economy. Prime Minister Mark Carney has strategic options to retaliate, focusing on sectors like steel, dairy, appliances, agricultural equipment, electronics, pulp and paper, among others. However, a majority of Canadians would likely oppose significant concessions to the US, as indicated by recent polls.

Carney has mentioned that Canada supplies the majority of US natural gas and electricity imports, and around 60% of crude oil imports. He hinted that the US may not want Canada to stop sending these energy resources. Ontario Premier Doug Ford, a vocal critic of Trump, suggested the possibility of a 25% surcharge on electricity exports to the US, which could impact 1.5 million homes and businesses in Michigan, Minnesota, and New York.

Canada is also a significant supplier of essential commodities such as potash, which is crucial for fertilizers. Ford stated that he would love to see the US struggle without potash, as it would hinder their car manufacturing and fruit production. The country also has substantial reserves of critical minerals like lithium, nickel, and graphite, which are vital for various industries. Ford expressed frustration with the US, asserting that they won't get a grain of sand out of Ontario.

Canada's ability to cause economic pain in the US has been demonstrated before. For instance, the decision by most provinces to ban US alcohol from liquor store shelves in response to the first wave of US tariffs early last year dealt a significant blow to the US wine industry. US wine exports to Canada plummeted by 78% year-over-year, resulting in a $357 million loss in export value.

Distillers association reported that exports of American spirits dropped by over 70% due to these boycotts, which have remained in place in 11 of the 13 Canadian provinces and territories.

While the US trade war with Canada escalates, with Trump threatening tariff hikes on autos and auto parts from Canada, Carney warns of the impact on US workers. Financial analysts estimate that the latest 50% tariffs on about $20 billion of Canadian imports could shave between 0.3% to 0.6% off Canada's GDP in the short term. However, a majority of Canadians support Ottawa's decision to drive a hard bargain against the Trump administration, even as they worry about their own job security.

The US midterm elections are approaching, with the economy being a crucial factor for voters, and two key Senate races are in Michigan and Maine, which both border Canada.