The return of Canadian negotiators and the implementation of 50 per cent U.S. tariffs have prompted the Canadian business community to assess the impact of these new levies. Business leaders exporting various goods, now facing these tariffs, anticipate severe consequences, potentially severing ties with the U.S. market.
BMO senior economist Robert Kavcic highlighted that the $28 billion worth of Canadian exports affected by the 50 per cent tariffs represents only a small fraction of total exports to the U.S. However, BMO’s analysis suggests that these tariffs could reduce Canada’s GDP growth by half a percentage point. The timing is unfortunate as the economy was showing signs of rebounding after a slow start to the year.
While the overall impact may appear modest at a national level, certain industries will bear the brunt of the tariffs. Electronics and electrical equipment producers are expected to be most affected, with significant exports to the U.S. Other sectors at risk include plastics, furniture, bedding, lighting, industrial machinery, and paper products, predominantly in Ontario, Quebec, and British Columbia.
Moreover, smaller businesses exporting consumer goods such as honey, candles, and hockey sticks will face disproportionate challenges due to the tariffs. The Canadian Federation of Independent Business (CFIB) reported that a considerable portion of its members exporting to the U.S. will be negatively affected, with potential revenue declines and loss of competitiveness.
Economist Trevor Tombe’s analysis warns of potential job losses in Canada due to the tariffs, estimating around 87,000 jobs at risk. The impact extends beyond the directly affected sectors, with supporting industries also facing losses. The uncertainty stemming from the tariffs poses a significant nationwide risk, potentially hindering economic growth.
The failure to reach a trade agreement could have long-lasting repercussions, including the potential collapse of the Canada-U.S.-Mexico Agreement (CUSMA). With the future of trade relationships uncertain, businesses are likely to hold back on investments and hiring decisions. The lingering effects of the trade tensions may persist, given the current administration’s stance on tariffs.