US Tariffs Won't Dampen Canadian Growth in Near-Term, Economists Say

Canadian economists believe that new U.S. tariffs and trade restrictions on Canadian goods will have little to no impact on Canada's near-term economic growth. However, they warn that a prolonged trade conflict could lead to stagnation or contraction in the fourth quarter.

The U.S. government announced plans to impose 50% tariffs on Canadian goods representing about 0.6% of U.S. imports from Canada, effective September 15th. Meanwhile, it will remove 50% tariffs on other goods valued at around $1.7 billion, which includes cement and switchgear assemblies.

Andrew Hencic, senior economist with TD Bank Group, said that the shift in tariff focus 'should not materially impact domestic growth in the near term.' However, he noted that it represents another manifestation of policy uncertainty weighing on Canadian firms.

Capital Economics' Stephen Brown warned that if the tariffs remain in place until the end of the year, Canada's economy could stagnate or contract in the fourth quarter. He estimated that Trump's new import bans will apply to 0.25% of Canada's exports to the United States, or 0.03% of total U.S. imports.