The escalating threat of tariffs from our southern neighbor appears to dominate public discourse at present. Although their enforcement has been inconsistent, the anticipated full effect in the early months of 2025 is expected to impose significant financial strain on Canadian enterprises across various industries.
A recent study by the Public Policy Forum, carried out by Navius Research, investigates the possible repercussions for each province and explores how Canada might respond with retaliatory tariffs.
“We initiated this research to offer quantitative insights to policymakers in real-time,” stated Inez Jabalpurwala, the president and CEO of the forum.
“The findings highlight critical areas of concern for Canadian leaders, particularly the urgent need to enhance east-west and west-east trade within Canada and beyond.”
Every province will face some level of decline, affecting sectors such as gasoline and diesel production in New Brunswick, aluminum exports from Quebec, steel and automotive industries in Ontario, potash and uranium from Saskatchewan, and oil and gas from Alberta. The vehicle manufacturing sector is projected to be the most adversely affected by President Trump’s tariffs, potentially incurring a loss of $93.8 billion in Ontario over five years, while Quebec’s aluminum sector could face a $12.7 billion loss in the same period.
Nevertheless, the outlook is not entirely bleak for Canadians. The report indicates that sectors primarily engaged in trade within Canada or with Asia and Europe may be shielded from US tariffs and could even see growth during this time.
“Sectors with access to wider markets, such as offshore oil production in Newfoundland and LNG (liquid natural gas) production on the west coast, may actually gain from tariffs,” remarked Jotham Peters, managing partner at Navius Research, “which could serve as a model for how Canada can protect its economy in the future.
“Greater trade networks to either the east or west coast will help insulate Canada from trade shocks with the US and can act as leverage for the next tariff threat.”
What would be the consequences if Canada retaliates?
Conversely, an analysis by the Public Policy Forum regarding the impact of a 25% retaliatory tariff on 23 categories of US imports into Canada indicates that the repercussions for the US would be more severe than for Canada.
Industries that would be affected include: food, pharmaceuticals, fabricated metals, alcohol and tobacco, manufactured goods, steel, plastics, cement, non-ferrous metals, paper, mining products, clothing, and wood products.
The report further indicates that tariffs on certain sectors could be more advantageous for Canada than for the US — primarily because Canada has sufficient alternatives to replace US goods, particularly in the case of alcohol imports.
Additionally, there are specific sectors that might suffer from US tariffs but possess enough production capacity to fulfill domestic demands, such as steel production in Ontario and Quebec.
The forum advises against imposing tariffs on products that depend on a highly integrated supply chain between the two nations, such as automobiles.
Moreover, Canada would inflict greater harm upon itself if it retaliates with tariffs on oil, electrical products, raw timber, natural gas, chemicals, refined petroleum, machinery, biofuels, agriculture, and vehicles.