Canada has officially imposed retaliatory tariffs on U.S. goods, including products that could directly affect the promotional products industry.

The move comes several weeks after President Donald Trump announced the U.S. would be implementing 25% tariffs on steel and 10% on aluminum from Canada, the EU and other countries. The reciprocal Canadian tariffs will be worth approximately $12.6 billion (C$16.6 billion), the value of the 2017 Canadian exports affected by the U.S.’s recent tariffs.

Canada’s Foreign Minister Chrystia Freeland, who has also been the country’s top trade representative during the recent NAFTA talks, announced the tariffs would go into effect this week, saying, “We will not escalate, and we will not back down.”

On the list of products that now come with penalties are steel and aluminum exports from the U.S., along with maple sugar and syrup, sugar confectionaries, chocolate, caffeinated roasted coffee, tableware and kitchenware, bobbins, pillows and cushions, playing cards, ballpoint pens and felt-tipped pens and markers.

Daniel Ujczo, international trade and customs lawyer with cross-border firm Dickinson Wright, told Counselor he expects the latest tariffs from Canada to be the last for a while, and that the back-and-forth penalties will reach a cooling off period. But the promotional products industry is still keeping a firm eye on the situation.

Ann Baiden, president of Innovatex Solutions Inc. (asi/231194) in Richmond Hill, ON, recently told ASI Canada that an all-out trade war would turn “ugly” for both countries. “It’s definitely in the best interest of the promotional products industry that they work out the trade deals,” she said, adding that Canada’s proposed tariffs on potential promotional products such as pens and playing cards will lead to increased prices.

“Those increases will trickle down to distributors, and ultimately to the client,” Danny Braunstein told ASI Canada. “If it becomes cost-prohibitive to source product cross-border, it will also affect the quality and variety of the product offering to the end-user. From a business perspective, we’re certainly watching closely, but it’s very difficult to do any sort of planning as it seems to be changing on a daily basis.”

Businesses in the two countries are also anticipating the effect the reactive tariffs will have on ongoing NAFTA negotiations. Another factor that could impact the talks is the newly elected president of Mexico, Andrés Manuel López Obrador, whom experts say could significantly disrupt the negotiation process. Rafael Elias, an analyst at Exotix Capital, expects Obrador will “take a hard stance and could possibly derail the advances” of the talks’ progress so far.

Ujczo told Counselor that the U.S. has been waiting for the Mexican elections to conclude before starting up talks again, and that they’ll gain momentum after the North Atlantic Treaty Organization (NATO) summit in July.

“The first discussions will be regarding NAFTA’s auto rules of origin, which include a U.S. request for 70% of all steel and aluminum to derive from North America,” he said. “The NAFTA countries may reach an agreement in principle on just that small piece, which would allow the parties to remove the tariffs and retaliation. The parties then could proceed with further discussions on the other issues in NAFTA.”