Canada is bracing for potential economic repercussions from the escalating trade dispute initiated by the U.S. President, with economists cautioning about the possibility of increased grocery costs, significant job losses, and even a recession if the proposed U.S. tariffs are implemented.
The U.S. is Canada’s primary trade partner, accounting for approximately two-thirds of Canada’s imports and over 70% of its exports. However, under the new tariffs – 25% on Canadian goods and 10% on energy – introduced by the U.S., Canada is now facing a considerable economic setback that could have widespread effects across key provinces, industries, and its national election.
The U.S. President has repeatedly criticized what he considers “unfair” trade practices, citing Canada’s trade imbalance with the U.S. as justification for the broad tariffs.
“This is the beginning of liberation day in America,” the U.S. President stated recently. “We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years. They’ve taken so much out of our country, friend and foe. And, frankly, friend has been oftentimes much worse than foe.”
Higher tariffs could result in increased prices for American consumers on a variety of goods, including fertilizer, oil, plastic, and wood products, which could discourage purchases and negatively impact the Canadian economy.
Similarly, Canada implemented retaliatory tariffs on $30 billion worth of U.S. goods in mid-March, meaning Canadians will experience losses not only on a broader economic scale but also directly, as grocery prices have risen for items such as beef, pork, and fish.
Ottawa has not yet announced any tariffs on U.S. imported vehicles, reportedly due to concerns about further damaging Canada’s economy. However, it is reportedly considering imposing tariffs on approximately $95 billion worth of U.S. goods, depending on the U.S. President’s announcements on April 2.
“They’re in the midst of a general election campaign,” Andrew Hale, a senior policy analyst in trade policy with the Heritage Foundation, told Digital. “I think it’s very difficult for them to negotiate and put these measures on during an election campaign.
“Everything they do and say now carries electoral weight,” he added, noting that Canada needs to find a balance: appearing firm on tariffs to appeal to voters while maintaining flexibility for future negotiations.
“If they were to put on reciprocal tariffs, it would damage the Canadian standard of living and have an impact – as all this already is having an impact – in Canada,” Hale said, noting that auto tariffs affect not only direct car sales but also all businesses that rely on vehicles, causing a ripple effect.
While the U.S. President has stated that his tariffs protect U.S. manufacturing, particularly the auto sector, the consequences could be more severe for Canada. Immigration Minister Marc Miller has cautioned that up to 1 million Canadian jobs are at risk.
“Most Canadians live within 100 miles of the U.S.-Canadian border, and so they obviously will be heavily impacted,” said Hale. “Most Americans don’t.”
Hale noted that while the tariffs will impact the entire U.S., industries closely linked to Canadian imports, such as agriculture, will be most affected. For example, the U.S. sources 90% of its potash fertilizer from Canada.
“This will have a disproportionate impact on border states,” Hale said, adding that the economic strain on Canadian regions like Ontario will be significantly greater.
Canadian leaders have already expressed concern about potential job losses, with estimates suggesting as many as 160,000 jobs could be lost in Quebec, along with other potential losses, depending on the duration of the tariff dispute.
Quebec and Ontario are among the provinces expected to be most affected in Canada, as they heavily rely on their steel, aluminum, lumber, and forestry sectors for exports.
Canada could experience a recession this year if it cannot control the U.S. President’s tariff policies, a report initially warned last November.
Previous tariff disputes between trading partners during the first U.S. presidential administration resulted in billions of dollars in losses for both Americans and their foreign counterparts.
However, the U.S. President is betting that the U.S. will be less severely affected than countries like Canada.
The full impact of the tariff war with Canada remains uncertain, as Washington has also imposed significant tariffs on the European Union, China, and Mexico. The U.S. President has pledged to target the “Dirty 15,” countries he accuses of contributing the most to the U.S. trade deficit.
Cambodia, India, Indonesia, Japan, Malaysia, South Africa, South Korea, Switzerland, Taiwan, Thailand, and Vietnam are expected to be among those targeted in the U.S. President’s upcoming tariff announcement, which he has called “liberation day.”
Details about the U.S. President’s next steps in the tariff war with Canada and numerous other nations are still unknown, creating uncertainty, Hale said.
“Last week’s Bureau of Economic Analysis Reports signaled a continued high core personal consumption expenditure PC inflation at 2.8%. So inflation, one could argue, is not coming down, and certainly price levels continue to rise,” he said. “Consumer spending has slowed sharply in both Canada and the United States.”
“Businesses want certainty. They can’t make future investment decisions in this climate,” he added, noting that while a recession could be on the horizon in Canada, there are too many variables to predict the impact on the U.S. at this time.
“What I do know is that businesses and banks, people who are investing in projects, want to be able to plan,” Hale said. “Hopefully, we’ll have a clear idea [on Tuesday] where this is all going to land, and then we can work with it.”
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