Trump's tariff threat could impact Canadian economy but may be negotiation tactic
The U.S. threat of 50% tariffs on Canadian goods could impact the economy, but experts suggest it might be a negotiation tactic
VANCOUVER, British Columbia -- The U.S. threat of 50% tariffs on Canadian goods will have a ripple effect on the country’s economy but also could be a negotiation tactic by the U.S. administration, experts say.
The new tariffs, announced by U.S. President Donald Trump on Monday, are scheduled to come into effect Aug. 19. They cover a wide range of goods, including honey, liquor, cement, dairy products, some wood products, hockey sticks, essential oils, perfumes, candles, dog leashes and wigs.
They exclude energy products, potash, fish and critical minerals, but would include goods previously protected from import taxes by the United States-Mexico-Canada Agreement, or USMCA. That 2020 trade pact was not renewed by the U.S., triggering a new set of negotiations that could run until 2036.
Prince Edward Island Premier Rob Lantz said the tariffs create uncertainty.
“We’re living in a time when uncertainty is the new norm,” Lantz said Wednesday following a meeting of the country’s premiers and territorial leaders in the province's capital, Charlottetown.
Randall Bartlett, deputy chief economist with Desjardins, one of Canada’s largest financial institutions, said the tariffs will impact about $28 billion Canadian ($19.8 billion) worth of annual Canadian exports to the United States. That’s about 5% of what the U.S. imports from Canada each year.
They have the potential to shave two to three tenths of a percent off growth in 2026 and 2027 in Canada, Bartlett said, although he said he didn't expect a recession.
"We’re expecting it to keep more investment on the sidelines (and) probably suppress hiring. That weighs on consumer activity and residential investment as well,” Bartlett said.
Fen Osler Hampson, a professor of international affairs at Carleton University in Ottawa, said the products hit by the tariffs are items U.S. consumers can decide not to purchase if prices rise.
Losing U.S. customers could lead to layoffs for companies that employ 10 to 200 workers that are the “backbone of the Canadian economy."
“That does have ripple effects in an economy because if people are out of a job, they’re not going to be spending," said Hampson, who is co-chair of the Expert Group on Canada-U.S. Relations.
Dennis Barby, president and CEO of Canadian Manufacturers and Exporters, said the tariffs would inflict serious damage on manufacturers, workers and consumers on both sides of the border.
“These tariffs will raise costs, disrupt production, and make North America less competitive at a time when we should be strengthening our shared industrial base,” Barby said in a release.
British Columbia Premier David Eby said it’s frustrating the U.S. is proposing tariffs on some Canadian goods while also looking to invest in Canadian mines to secure metals and minerals.
“You can’t have a country on one hand attacking one group of families and workers while hoping to have access to the resources in Canada that the rest of the world wants,” said Eby, who added that Canada should limit access to the resources the U.S. wants if its stance remains.
Experts Bartlett and Hampson said the tariffs could be a negotiation tactic, and may not come into effect. Still, Canadian trade negotiators should be cautious moving forward, they said.
Hampson warned against retaliatory tariffs or reducing oil or electricity shipment to the U.S.
“You don’t want to poke the bear,” he said. “You get into that kind of war, we’re going to lose. We’re the smaller economy. They can absorb a hit much more than we can.”
Hampson said the tariffs could reflect the tense relationship between Trump and Canadian Prime Minister Mark Carney, which has soured since Carney criticized his counterpart at the World Economic Forum in Davos.
On Tuesday, Carney said he and Trump have agreed to intensify trade talks.
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