Analysts indicate that Canada may lose 100,000 jobs due to current tariffs and could face a recession if the USMCA pact is terminated. The trade conflict initiated by US President Donald Trump is expected to negatively impact businesses in both the United States and Canada, with experts suggesting that the Canadian economy may suffer more significantly due to retaliatory tariffs.
On Saturday, the US imposed 50 percent tariffs on $20 billion worth of Canadian goods following the collapse of trade negotiations. Trump also threatened new 50 percent tariffs on all car products, effective January 1. In response, Prime Minister Mark Carney announced retaliatory measures against over 700 US products, also valued at $20 billion, with tariffs set to take effect on September 8, tiered at 15, 25, and 50 percent.
While there is a surge of nationalism in Canada, experts caution that economic losses may dampen this sentiment. Vina Nadjibulla, cofounder and CEO of the Centre for Strategic Statecraft, noted that while Canadians feel energized by standing up to Trump, the longevity of this sentiment is uncertain.
Canada's economy is significantly smaller than that of the US, with approximately 70 percent of its exports going to the US, making it particularly susceptible to US trade penalties. Oxford Economics estimates that the US tariffs will reduce Canada’s GDP by 0.3 percentage points next year, with specific provinces and sectors, such as Quebec, New Brunswick, Ontario, and British Columbia, facing the most severe impacts.
Ashley Kalyn, an international trade consultant, stated that the trade war is real and could lead to significant job losses in Canada. Some businesses are reportedly considering shutting down operations if tariffs persist.
Tensions escalated further when Trump announced that the US federal government would refer to Lake Ontario as Lake America, prompting a response from Prime Minister Carney, who highlighted the Indigenous origins of the name. Manitoba Premier Wab Kinew criticized the renaming as ineffective.
Economists warn that deteriorating relations could jeopardize the USMCA, which currently protects most Canadian exports from US tariffs. Tony Stillo, director of Canada Economics at Oxford Economics, stated that the end of the agreement could push Canada into a recession.
Despite the tariffs, the effective tariff rate on Canadian exports is projected to rise only slightly, from 5.1 percent to 6.9 percent. Matthew Holmes, executive vice president at the Canadian Chamber of Commerce, expressed hope for a resolution to the trade conflict.
The automobile industry is particularly at risk, with Trump's potential increase of tariffs on cars and parts to 50 percent expected to adversely affect both Canadian and US manufacturers. Bernard Yaros, lead US economist at Oxford Economics, noted that the car industry is already under strain from existing tariffs.
The timing of the tariff increase is notable, as it occurs after the US midterm elections, potentially allowing Trump to act without domestic political constraints. Within Canada, political responses to the trade conflict vary, with Ontario Premier Doug Ford advocating for a strong response, while other provinces like Alberta and Saskatchewan are hesitant to implement aggressive measures.
Experts emphasize that Canada's handling of this trade dispute could have broader implications for international relations. Nadjibulla highlighted that the key date to watch is September 8, when Canada’s retaliatory tariffs will take effect, indicating a period of potential escalation.