Canada's Tariffs on US Goods Won't Fuel Inflation, Economists Say

Canada's retaliatory tariffs on US goods have taken effect, but economists say they will not significantly drive up inflation. The measures, which apply to imports from the US including dairy, cosmetics, clothing and textiles, match the dollar value of duties imposed by the US under Section 338 of the Tariff Act of 1930. According to KPMG chief economist Ali Jaffery, about 20% of affected items are consumer products, a small enough percentage to keep inflation in check.

Jaffery said that tariffs are 'reasonably well designed' to limit economic damage and price pressures for Canadians. This is good news for consumers, with Loblaw Cos. Ltd. CEO Per Bank stating that the limited scope of the new duties will have a 'small impact on prices.' Desjardins principal economist Florence Jean-Jacobs also noted that tariffs are unlikely to put significant pressure on food inflation and may even help grocery retailers avoid squeezed profit margins.

The Bank of Canada has expressed concerns about rising inflation, with Governor Tiff Macklem stating that higher energy costs could drive up prices. However, the central bank's projections show that the average US tariff rate on Canadian imports is around 5%, compared to Canada's average tariff rate of 1.5%. This suggests that the impact of tariffs will be modest.