Derek Holt’s Saturday Night Tariff Thrashing delivers a scathing assessment of the Trump administration’s abrupt trade war escalation. Holt, Scotiabank’s VP & Head of Capital Markets Economics, dissects the fallout of the February 1, 2025, tariff imposition on Canada, Mexico, and China. His analysis not only captures the immediate policy responses but also sheds light on the deeper economic and political fractures set to unfold.
The Trade War’s Next Chapter
Holt wastes no time characterizing Trump’s latest move as a reckless economic assault. “The Trump administration has launched a trade war,” he writes, bluntly framing the gravity of the situation. The executive order leverages multiple legal provisions—including the International Emergency Economic Powers Act and section 301 of the Trade Act of 1974—creating a national security pretext for the tariffs.
Specifically, the U.S. imposed:
- 25% tariffs on all Canadian and Mexican imports,
- 10% tariffs on Canadian oil, electricity, and natural gas,
- An additional 10% tariff on China, above existing levels,
- Revocation of the de minimis exemption on U.S. goods shipped to Canada.
The setup is deliberately confrontational: “There is a provision in the U.S. executive order that will escalate tariffs if Canada responds,” Holt notes, reinforcing that this is not a negotiation—it’s an economic siege.
Canada’s Response: Retaliation, Not Appeasement
Unlike past Canadian strategies, which often sought to de-escalate tensions, the Trudeau administration wasted no time retaliating. Holt acknowledges the rapid response: "Overall, I have to give credit to PM Trudeau and Team Canada. They were clearly prepared for this and did their homework." The retaliation package includes:
- Immediate 25% tariffs on $30 billion of U.S. imports, targeting a range of goods from alcohol and food to appliances and raw materials.
- Further tariffs on $125 billion in goods in 21 days, allowing businesses time to adjust.
- Potential non-tariff measures, including procurement barriers and critical mineral access restrictions.
This marks a shift in Ottawa’s approach. The government’s messaging was clear: “We will not be pursuing measures that further divide the country,” Trudeau stated, signaling that the burden of retaliation will be evenly distributed across provinces.
Provinces Mobilize for Economic Defense
The response was not limited to federal action. Canadian provinces quickly took matters into their own hands.
- British Columbia’s Premier David Eby called the tariffs a “declaration of economic war”, announcing bans on U.S. liquor from red states and an acceleration of mining, natural gas, and renewable energy projects.
- Nova Scotia’s Premier Tim Houston ordered the removal of all U.S. alcohol from state-run liquor stores and doubled tolls for U.S. commercial vehicles at the Cobequid Pass.
- Quebec Premier François Legault vowed to penalize U.S. firms bidding on government contracts, leaving further escalation to the federal government.
Holt underscores that these retaliatory measures reflect a united front—a rare moment of national economic solidarity. “You can hear and see it in the responses of Canadian politicians of all stripes and levels of government who are unified around fully retaliating,” he writes.
Economic Fallout: Inflation, GDP, and Trade Disruptions
Holt anticipates swift economic consequences, particularly on inflation and supply chains. He warns that “inflationary supply shocks are coming once again,” reminiscent of the price spikes following Trump’s first round of tariffs in 2018.
- Consumer Prices: Tariffs on key imports—particularly food, materials, and manufactured goods—will raise prices for Canadians. “The household struggling with mortgage resets now faces a needless additional worry,” Holt warns.
- GDP Impact: Canada’s high trade dependency means that escalating tariffs could significantly dent economic growth. Supply chain disruptions could curtail production, while retaliatory measures may weaken cross-border investment.
- U.S. Economic Consequences: Holt points out that American businesses and consumers will also feel the sting. “Key players in the automotive sector are immediately warning of plant shutdowns and the cessation of production,” he notes, highlighting the deeply intertwined nature of North American manufacturing.
Financial Markets: Bond Yields, Equities, and Currency Fallout
Holt suggests that financial markets will react sharply once trading resumes after the Lunar New Year holiday. “I suspect that there will be swift, concentrated market reactions into the Monday open with particular emphasis upon the dollar, CAD, and MXN,” he predicts.
- Bond Markets: Given Canada’s measured retaliation, Holt sees an increased likelihood of Bank of Canada easing—meaning lower interest rates. However, deep supply chain shocks could complicate monetary policy.
- Equities: “The US aluminum industry is urging Trump to exempt Canada from tariffs,” Holt notes, signaling that industries reliant on cross-border trade—like metals, autos, and consumer goods—could face serious headwinds.
- Currency Markets: Expect heightened volatility in USD/CAD and USD/MXN. Holt suggests that the Canadian dollar will weaken as markets digest trade uncertainty, while Mexico’s peso could also come under pressure as retaliatory measures escalate.
A Historic Deterioration in U.S.-Canada Relations
Holt’s assessment extends beyond economics—it’s a referendum on the broader deterioration of U.S.-Canada relations. “Unfortunately, Canada-U.S. relations have sharply deteriorated in breathtaking fashion that I certainly haven’t seen in my life or 30-year career,” he states.
This is not just another round of political posturing; it’s a structural shift in North American trade relations. Holt calls on American businesses and consumers to push back: “It’s time for American businesses and consumers to join their Canadian peers to make their voices loud and clear that the path chosen by this U.S. administration is a terribly unwise one with deep ramifications for all.”
Final Thoughts: Economic Consequences and Political Realities
Holt’s analysis makes it clear—this is not a drill. The Trump administration’s tariffs have set off an economic chain reaction with unpredictable consequences. Whether the U.S. relents or digs in further remains to be seen, but Holt makes one thing certain: Canada is not backing down.
As the world watches how this plays out, one thing is clear—the era of stable North American trade is over.
1 Derek Holt, The Saturday Night Tariff Thrashing, February 2, 2025, Scotiabank
