Canadian Tariffs Delayed – WHY?

Canada has followed Mexico in a recent move to expand border security to temporarily delay tariffs. Justin Trudeau announced that $1.3 billion will go into a border plan, including new technology, equipment, and personnel. Trudeau said he will be appointing a Fentanyl Czar to oversee drug enforcement and will spend C$200 million on a new intelligence directive to handle drug-related crimes.

The peculiar aspect is that ALL of this was agreed upon last year. Public Safety Canada published “The Government of Canada’s Border Plan: significant investments to strengthen border security and our immigration system” on December 18, 2024, outlining the same plan to inject C$1.3 billion into US-Canada border security.

As the agency noted:

“Canada is investing $1.3 billion to bolster security at the border and strengthen the immigration system, all while keeping Canadians safe. This includes $667.5M for the Royal Canadian Mounted Police, $355.4M for the Canada Border Services Agency, $180M over 6 years for the Communications Security Establishment, $77.7M for Health Canada, and $20M over five years for Public Safety Canada.”

The initial proposal did not include a specified Fentanyl Czar but Canada had agreed to increase border security significantly. Days ago, Canada was planning to implement retaliatory tariffs specifically against Republican-led states. The press is cheering this news as a victory for Trump, but I fail to see what measures have changed aside from Canada expediting its border security pl21,889 pounds of fentanyl an.

The fentanyl crisis with Canada has been overstated. America seized 43 pounds of fentanyl last year, amounting to 0.2% of all fentanyl seized last year. Mexico, on the other hand, was responsible for 96.6% of fentanyl seized at the border or 21,158 pounds. The amount of fentanyl seized at the Canadian border did increase from 2023, but only by 2 lbs.

Were the tariffs a bluff? The markets do not like this volatility. The central banks will not appreciate this confusion as they have no way of knowing how to move forward with these tariffs up in the air. The central banks are always attempting to interpret future geopolitical events, and it is nearly impossible for them to do so when massive plans change at the eleventh hour. And what about the companies who need to price in these tariffs? Will they be forced to do so preemptively?

If Trump’s concern is genuinely about securing the border, then Trump has won. Mexico and Canada are working to secure the border as promised immediately. If his concern is to bring manufacturing back to America, then we have a bigger problem on our hands. Canada is simply making good on their promise from last year, but this is not a new development. Trade between the former alliance will become clearer once the USMCA deal is renegotiated.