Trump threatens Canada with auto tariffs as the country disagrees to the renewed trade agreements

President Donald Trump has threatened to impose severe economic penalties against Canada if it does not agree to his modified trade policies. Trump announced his plan to effectively terminate the North American Free Trade Agreement during a press conference and impose steep tariffs on all automotive imports from Canada.

Diplomatic relations between the Canadian Prime Minister Justin Trudeau and Trump appeared to hit a new low when Trudeau refused to agree to changes to NAFTA on a number of grounds. Trump accused Canada, their oldest trading partner of ripping off American workers from work and already imposed 25% tariffs on steel and 10% tariffs on aluminium imported from Canada, initiating an endless trade war. The latest on the list is a tariff on automobile and auto parts which will affect another huge part of businesses in both the countries. 

The worsened relationship between the two leaders has put the two economies at a dilemma and endangered the trade relationship that connects thousands of companies in both sides.

Trump said he refused to participate in a meeting with Trudeau during the United Nations General Assembly in New York on the ground that he disapproved the way Canada approached the trade discussions.  A spokesperson for Trudeau, however, declined such developments regarding a meeting.

Trump and several of his top aides have serious issues regarding Trump’s repeated threat to impose tariffs on auto imports and want to resolve it before re-negotiating NAFTA.

“My focus on this throughout has been simply not escalating,” Trudeau said Monday. “Not opining. Not weighing in. My job is very simple. It’s to defend Canada’s interests, stand up for Canadians.”

The White House plans to propose a new trade agreement between the U.S. and Mexico for review. The White House wants this trade deal to replace NAFTA, though it’s unclear if it is legally possible to replace a three-country pact with a two-country arrangement.

It is apparent that Trump is trying to create leverage over other countries by threatening tariffs, and that’s the approach he used for Canada too. He said he would impose tariffs on all of Canada’s automotive and auto part imports if they don’t agree to unrelated changes to NAFTA.

However, that could end up hurting U.S. auto companies that make cars in the US and buy auto parts from Canada. Tariffs are paid by importers of products, not foreign countries, and U.S. business executives would be forced to pass these costs on to consumers.

“If Canada doesn’t make a deal with us, we’re going to make a much better deal,” he said. “We are going to tax the cars that come in. We will put billions and billions of dollars into our Treasury.”

Trump’s comments on Wednesday started another new series of attacks on Trudeau and Canada, who feels bullied by the U.S.