What began as a bold show of economic nationalism in the form of tit-for-tat retaliatory tariffs against the U.S. has ended in a quiet retreat for Prime Minister Mark Carney and his government.
Today, voices initially critical of dollar-for-dollar retaliation, like Shopify’s CEO Tobi Lutke and Rumble’s CEO Chris Pavlovski are vindicated: retaliatory tariffs were a harebrained idea from the start.
When Carney stood at a podium in February 2025 and declared that Canada would hit back “dollar-for-dollar” against U.S. tariffs, many Canadians applauded. But just a few months later, the smoke has cleared — and political posturing has given way to economic reality.
During his inaugural Question Period yesterday as Prime Minister, Carney faced sharp criticism from interim Conservative Opposition Leader Andrew Scheer. Scheer accused Carney of misleading Canadians by lifting most retaliatory tariffs during the April election without public disclosure until May.
“During the campaign, it was ‘elbows up,’ then secretly, he dropped those tariffs to effectively zero,” Scheer charged, noting Carney’s promise of $20 billion in tariff revenue to fund his platform had evaporated
Carney’s response—that remaining tariffs had “maximum impact” on the U.S. while sparing Canadians—rang hollow when Oxford Economics revealed on May 15 that exemptions had nullified nearly all levies and the Canadian economy was still headed for recession.
Finance Minister François-Philippe Champagne scrambled to defend the policy on May 17, insisting on X that 70% of the $60 billion in tariffs imposed in March remained active. Yet, Oxford’s report contradicted this, showing exemptions for manufacturing, health, and safety goods had gutted the tariffs’ impact.
Champagne’s claim that the pauses were “temporary” for public safety reasons failed to address why the government buried the April 15 decision until May 7, post-election.
Oxford Economics now reports that the actual economic impact of Canada’s so-called retaliatory tariffs is “nearly zero” thanks to sweeping carve-outs quietly introduced during the federal election campaign.
The timeline of Canada’s tariff saga reveals a pattern of bravado followed by backtracking. On February 1, 2025, former Liberal prime minister Justin Trudeau announced $155 billion in retaliatory tariffs—$30 billion immediate, $125 billion delayed—targeting U.S. goods like orange juice and apparel. Carney, then vying for Liberal leadership, echoed this with a pledge for “dollar-for-dollar” retaliation, vowing not to “bow to a bully.” Even Conservative Leader Pierre Poilievre, despite his later criticism, initially supported dollar-for-dollar retaliation.
These developments didn’t come out of nowhere. Many warned against this course of action from the beginning — not from a position of weakness, but out of economic realism that was obvious to all, except those hoping to score political goals.
Shopify CEO Tobi Lütke, as early as February 1, blasted the initial counter-tariff plans:
“Leadership is about doing what’s right, not what is popular. And hitting back will not lead to anything good. America will shrug it off. Canada will decline.”
Chris Pavlovski, CEO of Rumble, offered a similarly blunt assessment:
“Canada has leaders that want to pretend to be tough… Trump will outplay all of them and already has.”
Food expert Sylvain Charlebois argued that tariffs on essential goods would only hurt Canadian families:
“Canada cannot win a trade war by taxing its own people.”
He warned that targeting U.S. imports of food, packaging, and manufacturing equipment would drive up domestic costs and endanger Canada’s food security. He was quickly proven correct. With inflation already squeezing working families, the government’s decision to tax imports did more harm to Canadian wallets than it ever did to U.S. industry.
From the get-go, Alberta Premier Danielle Smith stood alone among her peers in seeking diplomacy instead of threatening tariffs. Smith was an early critic of retaliation as Trudeau and Ontario Premier Doug Ford threatened to use Alberta’s energy exports as a bargaining chip.
“I always think that you should try to avoid a fight, especially when you’ve got a bigger adversary that you’re fighting against,” Smith said.
“The American economy is 10 times the size of Canada, and if we get into some kind of tit-for-tat retaliatory tariffs, neither country is going to benefit from that.”
So what changed for Ottawa? Carney met with Trump on May 6 at the White House. Soon after the order to nullify tariffs went public.
Carney’s pivot to exemptions and talks with Trump reflects a stubborn and belated recognition. Yet, the lack of transparency—hiding the tariff rollback during the election—has eroded trust for his new minority government.
Lutke, Pavlovski, Charlebois, and Smith saw what Ottawa missed: in a fight with the U.S., Canada punched above its weight only to bruise itself.
