Trump Tariff Threat Sends Shivers Through Canadian Economy

Canada's economy is facing potential disruption due to US President Donald Trump's threat of 50% tariffs on Canadian goods. The tariffs, announced on Monday, are set to take effect on August 19 and will impact around $28 billion worth of annual Canadian exports to the US, which is about 5% of what the US imports from Canada each year.

The affected products include honey, liquor, cement, dairy products, some wood products, hockey sticks, essential oils, perfumes, candles, dog leashes, and wigs. However, energy products, potash, fish, and critical minerals are exempt.

Experts warn that the tariffs could shave two to three tenths of a percent off growth in 2026 and 2027 in Canada, although they do not expect a recession. Randall Bartlett, deputy chief economist with Desjardins, said that the tariffs will likely keep investment on the sidelines and suppress hiring, weighing on consumer activity and residential investment.

Fen Osler Hampson, a professor of international affairs at Carleton University in Ottawa, suggested that the products hit by the tariffs are items US consumers can choose not to purchase if prices rise. However, losing US customers could lead to layoffs for companies that employ 10 to 200 workers, which are crucial to the Canadian economy.

British Columbia Premier David Eby criticized the US proposal, saying it's frustrating to see the US attacking Canadian families and workers while seeking access to Canadian resources. Experts Bartlett and Hampson also noted that the tariffs could be a negotiation tactic, but cautioned against retaliatory measures or reducing oil or electricity shipments to the US.

Hampson warned against provoking the US, stating that 'you don't want to poke the bear.' He attributed the tense relationship between Trump and Canadian Prime Minister Justin Trudeau to Carney's criticism of Trump at the World Economic Forum in Davos.