Canada is in a trade war with the U.S. and things could get rough. Here's what to expect
'Trump's tariff hammer will come down hard on Canada's economy': Bank of Montreal
It's feared that hefty U.S. tariffs to be imposed this Tuesday on goods imported from America's three largest trading partners — Canada, Mexico and China — could upend industries from autos to consumer goods to energy.
After threatening tariffs for weeks, U.S. President Donald Trump announced on Saturday that they'll come into effect, with a levy of 25 per cent on Canadian and Mexican imports, and an additional 10 per cent tax on Chinese goods. Canadian energy faces a 10 per cent tariff.
To counter the U.S. tariffs, Canada will start by slapping 25 per cent tariffs on $30 billion worth of American goods coming into Canada as of Tuesday. The tariffs will then be applied to another $125 billion worth of American imports in three weeks' time.
Some Canadian industries have been quick to react to the trade war.
Here's how tariffs that Trump says will be imposed on Tuesday and Canadian retaliatory measures starting the same day may have an impact.
Cost of living
"Trump's tariff hammer will come down hard on Canada's economy," the Bank of Montreal said on Sunday. "If the announced tariffs remain in place for one year, the economy would face the risk of a modest recession."
The bank forecasts reduced demand for Canadian goods in the United States due to Trump's levies; disrupted supply chains as businesses try to navigate through uncertainty; and higher prices for goods in Canada due to Ottawa's retaliatory tariffs.
"For Canadian households, this means an increase in prices of multiple consumer goods, including groceries, appliances and especially vehicles," Tu Nguyen, an economist at RSM Canada, said in a statement, adding that Canadians should also expect a smaller selection of goods as the importing of U.S. products slows down.
"The depreciation of the Canadian dollar could mitigate the prices of exports for U.S. importers, but this exacerbates the pain for Canadian businesses and consumers."
Unemployment
Nguyen said layoffs and higher unemployment can also be expected.
"Job losses should be expected across industries, from manufacturing to tourism to transportation," she said.
"Higher prices decrease demand, which means aggregate demand for goods across the U.S. and Canada would drop — leading to fewer jobs."
Nguyen said higher unemployment will further drive down demand for services, particularly impacting the restaurant, hospitality and entertainment industries.
Auto manufacturing
The North American auto manufacturing industry could be facing production shutdowns in Canada, the U.S. and Mexico because it's such an integrated sector and runs a "very efficient" supply chain, Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers' Association, said.
Hefty U.S. tariffs would have a "very immediate and serious" impact on that supply chain, he said, and Americans may soon have to shell out thousands of dollars more for a new vehicle, due to more costly parts and components.
"The auto industry's going to hit really hard," and it won't be possible to find other markets in the short term," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association and a member of the Prime Minister's Council on Canada-U.S. Relations.
"Ultimately, Americans have to stand up for themselves and their own interests. Some of those will align with us," Volpe said, citing much higher inflation as a possible result of the tariffs. He said affected industries should support the federal government in remaining tough during negotiations.
Steel and aluminum
The United Steelworkers, the largest industrial union in North America, has criticized Trump's tariffs on Canada, citing some $1.3 trillion US in trade between the two countries.
"These tariffs don't just hurt Canada. They threaten the stability of industries on both sides of the border," the union's international president David McCall said in a statement.
The Aluminium Association of Canada called the 25 per cent U.S. tariffs on all Canadian goods heading south "highly disruptive" to the integrated economies of the two countries.
"This situation will unfortunately impact workers and consumers in America with the immediate increase on the price of aluminum," said association president and CEO Jean Simard.
The group says about 9,500 Canadian workers produce the metal that is processed and made into parts and everyday products by more than 500,000 American manufacturing workers, generating more than $200 billion US in economic output in the U.S. economy alone.
Beer, wine and liquor
American alcohol will disappear from liquor store shelves in Manitoba, Ontario, British Columbia, Newfoundland and Labrador, and Nova Scotia in a show of support for Ottawa's plan aimed at getting the U.S. to back down from tariffs. Ontario on Sunday joined those provinces in saying it will remove U.S. alcohol from store shelves, starting Tuesday, when the U.S. tariffs go into effect.
Ontario Premier Doug Ford said booze from the U.S. will no longer be available in LCBO stores. As the only wholesaler of alcohol in the province, the LCBO will also remove the products from its catalogue so restaurants and retailers can't order or restock them. Every year, LCBO stores sell nearly $1 billion Cdn worth of American wine, beer, spirits and seltzers.
Late Saturday, B.C. Premier David Eby directed the B.C. Liquor Distribution Branch to immediately stop buying American liquor from "red states" and pull existing stock from store shelves. Eby called the move "a declaration of economic war against a trusted ally and friend."
On Sunday, N.L. Premier Andrew Furey said U.S. products will be pulled from all liquor stores across the province, and he urged residents to support provincial and federal efforts to stand up to "the American bully next door."
Energy
The energy sector faces a lower tariff, at 10 per cent. But the CEO of Calgary-based Surge Energy, a junior oil producer that operates in Alberta and Saskatchewan, said on Sunday that the impact will be "muted."
Paul Colborne told CBC's Rosemary Barton Live that the tariffs on energy will be "impactful" but that "it's still very much business as usual" for his company because it pre-negotiated a price for its oil and locked in — a practice known as hedging to help mitigate the impact of unanticipated price drops for oil and gas producers and their revenues.
Crop and animal production
Russ Mallard, president of Atlantic Beef Products and chair of the Canadian Meat Council, said the market for beef products could suddenly become unavailable.
Mallard said 35 per cent of all Canadian beef products are shipped to the U.S. Closing off or limiting the American market could open market opportunities in new countries, he said, but that would only happen in the long term.
"If that market is suddenly closed or unavailable ... that means that beef could conceivably stay here in Canada, and it's going to take a while to find new markets," Mallard said. "That means that prices to producers ... as well as processors will likely fall.
"Short-term implications, it might be good for consumers, but the long-term implications, it'll likely be negative for the industry."
