O’Leary’s China optimism meets a harder deadline — Canada’s new 50% US tariff hits Aug 19

Kevin O’Leary has a theory about why Canada, the US and Mexico will stay economically united no matter how ugly the trade fights get: fear of China.

He shared his theory in a video post the same week Canadians got an immediate reminder of how fractured North American trade already is. On July 20, President Donald Trump signed three proclamations under Section 338 of the Tariff Act of 1930, imposing a new 50% tariff on billions of dollars worth of Canadian exports, including many alcohol, dairy and manufactured products. The new duties take effect August 19, 30 days after they were announced.

O’Leary’s point wasn’t that trade tensions will disappear overnight. Rather, he believes broader geopolitical interests will eventually outweigh the current disagreements.

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Details of the proposed tariff

The three new proclamations single out sectors such as alcohol and dairy, which the White House says Canada treats unfairly compared with other trading partners. Reported goods facing the new 50% duty include wine, beer and cheese, layered on top of existing tariffs already in place on steel, aluminum and automobiles. Energy, potash, critical minerals and fish are excluded.

The White House also cited Canada’s retaliatory tariffs as part of its justification, pointing to a US$5.6 billion, or 22%, decline in U.S. vehicle exports to Canada over the past year. Ottawa introduced those counter-tariffs to pressure Washington, but they’ve become part of the argument for imposing additional tariffs on Canadian exports.

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Why the new tariffs are the bigger issue for Canadians

Canada and the US never renewed the Canada-United States-Mexico Agreement (CUSMA), and there’s a chance the two sides could be negotiating a replacement well into the next decade.

In a recent report on monetary policy, the Bank of Canada has flagged trade uncertainty as one of the biggest risks to its inflation outlook, alongside the Iran war. Headline inflation reached 2.8% in June, driven mostly by gasoline prices, though inflation excluding gas remains stable at 2.2%. The bank held its policy rate at 2.25% in July, citing an economy that seems to be gaining traction, but macroeconomic risks still persist.

Research from the Bank of Canada into an earlier round of tariffs found that roughly one-quarter of a 25% tariff was eventually passed on to consumers, temporarily adding about 0.3 percentage points to inflation before fading once the tariffs were removed.

This situation is different. Those earlier measures involved Canada’s retaliatory tariffs on American imports. The proposed 50% tariff applies to Canadian goods entering the U.S., making the immediate risk less about higher prices for Canadian shoppers and more about reduced demand for Canadian exports, slower business investment and pressure on jobs in industries such as manufacturing, dairy and alcoholic beverages.

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What to do now

Trade policy can change quickly, but household financial plans shouldn’t depend on predicting political outcomes. If your income or investments are tied to industries caught in the middle of the dispute, now is a good time to review your financial cushion rather than wait for the tariffs to take effect.

Consider these steps:

• If your household income depends on one of the affected sectors, build or strengthen your emergency fund before the potential August 19 implementation date.

• If you’re renewing a mortgage this year, keep an eye on Bank of Canada rate decisions, which have become increasingly influenced by trade uncertainty and energy prices.

• Avoid making major financial decisions based on any single political prediction, including O’Leary’s. Planning for continued uncertainty is generally a safer strategy than assuming a quick resolution.

O’Leary may be right that Canada, the United States and Mexico remain stronger together than apart and will ultimately figure things out. But for workers and businesses facing new tariffs, the next few weeks are more critical than the next decade.

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This article originally appeared on Money.ca under the title: O’Leary’s China optimism meets a harder deadline — Canada’s new 50% US tariff hits Aug 19

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.