Introduction to the US-Canada Trade War

The trade war between the United States and Canada has intensified over the past 48 hours, with Ontario Premier Doug Ford and U.S. President Donald Trump engaging in a verbal spat. The conflict began when Canada announced it would impose a surcharge on some of its energy exports to the U.S. Trump responded by announcing new tariffs, but both sides now appear to be backing down.

The Spark that Ignited the Trade War

On Monday, Ford announced a 25% surcharge on the power Ontario exports to Michigan, Minnesota, and New York. This move is expected to affect 1.5 million homes and cost people in those states around $400,000 per day. Ford warned that if the U.S. escalates the situation, he will not hesitate to shut off electricity completely.

Trump’s Reaction to the Surcharge

Trump took to social media platform Truth Social to express his discontent with Ford’s announcement. Despite the fact that Canada is charging the U.S. high tariffs on many farm products, Ontario’s decision to impose a surcharge on electricity was seen as unacceptable by Trump. However, Canada is, in fact, allowed to impose such surcharges as part of its trade agreements with the U.S.

A Complex and Interconnected Energy Relationship

The U.S. and Canada have a complex and close-knit relationship based on trade, with a significant portion of that trade involving energy. A 2018 study by the Center for Strategic & International Studies mapped out the intricate web of energy relationships between the two countries. Energy moving between the two countries accounts for around $85 billion in bilateral revenue, with 70 cross-border petroleum and natural gas pipelines as of 2020.

Canada’s Energy Advantage

Canada generates an enormous amount of energy and has vast reserves of natural gas and minerals. The country is also a leading exporter of uranium, a critical component in the construction of nuclear power plants. With 10 times the reserves of the United States, Canada has significant leverage in the energy sector.

Trump’s Ambitions and Canada’s Response

Trump has directed the U.S. to build more nuclear power plants, which could increase demand for Canadian uranium. However, Trump’s goals in negotiating with Canada are not always clear. Canada’s leaders, on the other hand, seem ready to defend their interests. Incoming Canadian Prime Minister Mark Carney has warned that Canadians will not back down in trade disputes,just as they wouldn’t in hockey.

Escalation and De-escalation

Despite the initial escalation, Ford agreed to rescind the energy surcharge after speaking with U.S. Secretary of Commerce Howard Lutnick. The two sides agreed to meet in Washington to discuss a renewed USMCA ahead of the April 2 reciprocal tariff deadline. However, Trump has since announced additional tariffs on Canadian steel and aluminum, declaring a National Emergency on Electricity and threatening to take action against Canada’s "abusive threat."

Conclusion

The trade war between the U.S. and Canada is a complex and multifaceted issue, with energy playing a critical role. As the situation continues to unfold, it remains to be seen how the two countries will navigate their interconnected energy relationship and find a resolution to the trade dispute.