The trade war that United States President Donald Trump has triggered with Canada is expected to hurt businesses in both countries. But experts say the damage to the Canadian economy will be worse, as the tit-for-tat tariffs have raised the chances of a recession. On Saturday, the US imposed 50 percent tariffs on $20bn worth of Canadian goods after trade negotiations between the two countries collapsed.
On Monday, Trump also threatened Canada with new 50 percent levies on all car products, starting January 1. On Tuesday, Prime Minister Mark Carney unveiled retaliatory measures against more than 700 US products, also valued at $20bn. The tariffs are tiered at 15, 25 and 50 percent, and they are slated to come into effect on September 8.
But while Canada’s efforts have sparked a surge of nationalism, experts warn the feeling might sour in the face of economic losses. Canada’s economy is a 10th the size of its US counterpart, and the country sends about 70 percent of its exports south of the border, which makes it especially vulnerable to US trade penalties. While the US tariffs will have a limited impact on the overall Canadian economy — the advisory firm Oxford Economics estimates they will shave 0.3 percentage points off its gross domestic product (GDP) next year — they will hurt specific provinces and sectors more significantly.
Manufacturers in Quebec, New Brunswick, and Ontario will be affected the most, as will exporters in British Columbia, as they rely heavily on sales to the US. According to Oxford Economics, those provinces are vulnerable because they produce items that are easy to substitute. Top of that list are cement, paper, wood, beverages, clothing, plastics and electronics.
Similarly, while Canada’s tariffs on the US will have a muted impact, the costs on the individual states and businesses that rely on Canadian trade will escalate. Tensions have continued to escalate this week after Trump announced on Thursday that the US federal government will now refer to Lake Ontario as Lake America, in protest against Canada. Prime Minister Mark Carney pointed out on social media that the word “Ontario” is not Canadian but Indigenous.
Manitoba Premier Wab Kinew also dismissed the renaming as a feeble effort. Trump had made a similar announcement last year, swapping the name “Gulf of Mexico” for “Gulf of America” amid tensions with Mexico over immigration and border security. I think that’s the part of Donald Trump’s presidency we’re at now,” Kinew told reporters in Winnipeg.
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