Canada's Economic Growth Unfazed by New U.S. Tariffs, But Trade Uncertainty Rises

The Royal Bank of Canada (RBC) has analyzed the new Section 338 U.S. tariffs on Canadian exports, which affect about 5% of Canada's exports to the United States at a 50% rate.

The bank argues that these measures are not large enough to derail Canada's economic growth, but warns they significantly impact sectors like plastics, electrical machinery, and wood products.

The RBC notes that the regions most affected by the new measures are Quebec, British Columbia, and Ontario, where purchases of these products from Canada would be prohibitively expensive due to the high tariff rate.

Although the bank expects the broader macroeconomic impact of these new tariffs to be limited, they do not rule out a potential shift in trade flows within North America to avoid increased tariff costs.