“Canada has been ripping us off for years on lumber and on dairy products,” Trump said in an Oval Office address, citing Canada’s roughly 250 per cent tariff on US dairy exports to the country. Trump said America would match those tariffs dollar-for-dollar.

“We may do it as early as today, or we’ll wait until Monday or Tuesday,” Trump said. “We’re going to charge the same thing. It’s not fair. It never has been fair, and they’ve treated our farmers badly.”

Trump’s announcement gave investors, businesses and consumers another strong dose of whiplash. Just one day earlier, on Thursday, Trump announced a one-month pause on all tariffs on Canada and Mexico on products that comply with the US-Mexico-Canada free trade treaty, known as the USMCA. That had, at least temporarily, given many industries, especially autos and agriculture, a major sigh of relief.

On Friday Trump said more “changes and adjustments” on tariffs should be expected in the future.

“There’ll always be some modifications,” Trump said from the Oval Office. “If you have a wall in front of you, sometimes you have to go around the wall instead of through it.”

Stocks, which were lower to start the day after a mixed bag of a jobs report, initially fell after Trump’s tariff threat but rose after Federal Reserve Chair Jerome Powell offered a mostly positive outlook on the economy. The Dow was up about 200 points, or 0.4 per cent. The broader S&P 500 rose 0.4 per cent, and the tech-heavy Nasdaq was up 0.4 per cent after falling into correction territory Thursday — a 10 per cent decline from its most recent high.

Markets have fallen deep into the red since Trump took office, with the Nasdaq leading declines. The S&P 500 is down about 3 per cent since Inauguration Day, in large part because of economic uncertainty.

“The market is having trouble digesting the multidimensional chess that Trump and his team are playing,” said Michael Block, market strategist at Third Seven Capital. “This multidimensional chess game is not going well for the grand master. There may be a method to the madness. He might be trying to confuse world leaders. But the market is saying stop confusing us. We don’t like this.”

Trump’s threat on Friday added more uncertainty into an economy that has shown cracks in its foundation and could be in danger of slipping if businesses and consumers grow nervous about the administration’s economic policy. Layoffs are mounting, hiring is slowing, consumer confidence is eroding and inflation is picking up again.

Tariffs could worsen all of those factors.

A dairy spat years in the making

Canada charges exorbitant tariffs on certain dairy products, including a tariff on milk that can be as high as 241 per cent, much to the consternation of America’s dairy farmers, who have complained for years that the border nation is treating them unfairly.

In 2023, a trade dispute panel ruled in favour of Canada, arguing that the high import taxes did not violate the USMCA. Wisconsin Democratic Senator Tammy Baldwin lambasted the decision, arguing it was creating an undue burden on her state’s dairy industry.

“Wisconsin dairy farmers work hard every day to bring world class products to market, and they deserve a level playing field with their global competitors,” Baldwin said in the wake of the November 2023 decision. “This decision flies in the face of the agreement our country made with Canada and puts our Made in Wisconsin dairy products at a disadvantage.”

But Trump, who frequently complained about high dairy tariffs in his first term in office, did not negotiate more reasonable tariffs into the USMCA treaty, which he signed.

Despite the grievances and the alarmingly high number, Canadian dairy is not a significant export, and a reciprocal 241 per cent tariff on milk is unlikely to do significant economic damage to either country.

Lumber tariffs threaten home affordability

Trump has been criticising Canadian tariffs on US lumber for several weeks, claiming America should respond in kind. He has claimed America can do without Canadian lumber.

An executive order Trump signed Saturday said America has an “abundance of timber resources that are more than adequate to meet our domestic timber production needs.” It’s not quite that simple, industry experts argue: They warn tariffs could end up increasing lumber and building costs — and even push up housing prices for consumers.

The United States has 300 billion trees, but economists and homebuilders caution that America does not currently have the industrial capacity to meet the demand and that placing a significant tariff on Canadian lumber imports could further exacerbate the ongoing housing affordability crisis.

Lumber is a critical ingredient in the US homebuilding industry, and the United States sources about 30 per cent of the softwood lumber it uses annually from Canada. Lumber imports from Canada are already subject to countervailing and anti-dumping duties of 14.5 per cent.