Uncertainty is a funny thing: you can get used to uncertainty and, in turn, feel less uncertain. In a sense, this is what has happened with regard to U.S. trade policy.

Arguably, where everything is going to end up is just as uncertain as it was when Trump took office in January. But, because shifting tariff threats and trade deal timelines have become the norm, it doesn’t feel as strange as it did.

We can, at least, be pretty certain that tariffs are not going back to the way they were before Trump 2.0 and that it’s probably not going to be as bad as it seemed on April 2 when the U.S. announced sweeping reciprocal tariffs.

This doesn’t mean uncertainty has gone away. As the chart below shows, it remains extremely high in Canada. It is, however, much lower than it was a few months ago when exaggerated U.S. tariff threats were still relatively novel.  

U.S. tariffs on Canada

On February 1, when the White House announced a 25% tariff on Canadian goods entering the U.S. (10% for energy products) it was looking pretty bleak for Canada’s export sector. The blanket tariff was paused, reinstated, and then cut back by the announcement that Canadian exports compliant with the Canada-United-States-Mexico Agreement would not be subject to the blanket tariff. Specific tariffs were imposed on the steel and aluminum sector (without exemptions) and the auto sector (with exemptions). The Budget Lab at Yale estimates that this adds up to an average U.S. tariff rate on Canada of 11.2%.

As per our latest forecast, the trade war is expected to weigh on Canada’s economy with real GDP growing by just 1% this year. The exemptions for energy exports will shield Alberta from the tariffs to some degree with growth this year forecast at 1.9%.

Negotiations for a new trade “deal” between Canada and the U.S. are ongoing with a deadline of July 21. The hope is that Canada will negotiate a relatively low tariff rate (see the section below on what the U.S. is planning for other countries).

U.S. tariffs on everyone else

On April 2 (a.k.a. Liberation Day), the U.S. announced a baseline 10% tariff and country-specific "reciprocal" tariffs ranging from 11% to 50%. Canada was excluded from these measures. On April 9, the U.S. announced that the reciprocal tariffs would be paused (except for China) for 90 days to allow for bilateral trade deals to be struck. The pause was supposed to expire today, but it has been extended to August 1. The U.S. is threatening to impose higher tariffs on the countries with which it does not complete deals. Trump told reporters on Monday that the August 1 deadline is “firm but not 100% firm.”

Taking into account everything that has been announced as of Monday, July 7, the Budget Lab at Yale estimates that the average effective tariff rate on goods imported into the U.S. stood at 17.6%. As the chart below shows, this is the highest U.S. tariff wall since 1934.

In the meantime, the President mentioned yesterday that the U.S. is planning to impose a 50% tariff on copper and potentially a 200% tariff on pharmaceuticals.  

So far, agreements reached with the U.K. and Vietnam and 14 letters sent by the White House to countries like Japan and Indonesia outlining new tariff rates make it clear that some sort of blanket U.S. tariff will be part of U.S. trade with other countries—the only question being how high it will be and what other tariffs will also apply.

Answer to the previous trivia question: Quebec is the province with the largest area.

Today’s trivia question: Which U.S. city is home to Yale University?