In a bold move from U.S. President Donald Trump, Canada is now facing its most significant trade threat yet with a sweeping 50 per cent tariff on a broad range of Canadian goods. Businesses nationwide are bracing for the impact of these tariffs.
The focus is on several key sectors at risk. While alcohol and hockey equipment have been widely discussed, the electronics industry is poised to bear the brunt of the blow. With over $4 billion US in electronics exports to the U.S., certain electrical components face the highest value of exposure to the new tariffs. Additionally, Canada’s plastics sector, encompassing items like bottles and household products, could see around $3 billion US in threatened exports.
The White House has issued three proclamations targeting over 500 Canadian goods, linked to contentious issues such as provincial alcohol regulations, Canada’s dairy market protection, and the interconnected auto industry. Notably, passenger vehicles are not on the tariff list, but motorcycles and certain components are included. Furthermore, Canadian beverage exports worth approximately $900 million US are also in jeopardy.
When considering the impact on provinces, British Columbia is set to be disproportionately affected by the tariffs, particularly in wood and paper exports, representing more than 13 per cent of the province’s total exports to the U.S. Quebec is also at risk, with approximately 11 per cent of its U.S. exports now facing potential duties, adding to the existing burden of steel and aluminum tariffs.
The cross-border effects are significant given Canada’s heavy reliance on U.S. trade. Nearly four per cent of Canada’s total exports worldwide could be subject to the 50 per cent surcharge. While the U.S. economy is diverse and large, the tariff list represents only about half a per cent of its global imports. Notably, research suggests that the costs of tariffs are predominantly passed on to the end consumer.
President Trump’s utilization of a never-before-used 1930s law granting him the authority to impose these tariffs marks a substantial shift in trade relations. Unlike past disputes with the U.S., there are no exemptions for items covered under the Canada-United States-Mexico Agreement (CUSMA), with ongoing negotiations on the horizon.