Tariffs, trade and unity: What Trump’s return means for Canada

Like my fellow Canadians, I have been anticipating the inauguration of President Trump and the trade tariffs that could come with him starting Feb. 1. During his last presidency, tariffs were applied to steel, aluminum and other products, and the impact of similar tariffs today would likely mirror some of the past consequences. If tariffs are reintroduced or increased, Canadian manufacturers and importers of U.S. goods could face higher costs, which would lead to higher prices for Canadian consumers or decreased profit margins for businesses.

Canada and the U.S. have a deeply integrated supply chain, especially in industries like automotive, agriculture and natural resources. Tariffs could disrupt this flow, delay shipments, and lead to inefficiencies or reduced access to key materials. Vehicles are the second-largest Canadian export by value at $51 billion in 2023, of which 93 per cent were exported to the U.S. Automotive is Ontario’s top export, accounting for 28.9 per cent of all exports in 2023. Pair that with the division in the energy/oil and gas sectors in the west, where four million barrels of daily exports ship to the U.S., and we could have a real issue on our hands. While 12 of the 13 premiers have agreed to stand united against the implementation of what is to come, Alberta’s premier is standing firm that the energy sector in Alberta is off the table.

Additionally, in response to tariffs, Canadian businesses may seek to diversify their sources of goods or raw materials to avoid higher tariffs, which could shift trade patterns and increase reliance on non-U.S. suppliers, particularly from countries with more favourable trade relationships with Canada. This is especially concerning for our economy as our dollar continues to fall relative to the U.S. dollar. The possibility of tariffs influencing currency exchange rates, and a slowdown in trade or market uncertainty, could result in the Canadian dollar weakening even further, affecting import prices and the overall economy.

Canada could retaliate with its own tariffs on U.S. goods, which might escalate tensions and lead to a tit-for-tat tariff war, further complicating the supply chain between the two countries. According to Bloomberg, Canada has drawn up an initial list of $150 billion (US$105 billion) of U.S.-manufactured items that it would hit with tariffs if President-elect Donald Trump decides to levy tariffs against Canadian goods. More tariffs from Canada might be added later, depending on what the U.S. does. The products on that initial list weren’t disclosed. When Trump placed tariffs on Canadian steel and aluminum in 2018, Canada responded with levies on a variety of U.S.-manufactured items, such as whiskey and washing machines — a pressure tactic aimed at putting the squeeze on factories in areas where Republican politicians had influence. Those tariffs were much smaller in scope, affecting about $16.6 billion of U.S. exports at the time.

Ahead of his inauguration, a presidential memo sent to U.S. federal agencies instructs them to re-examine trade policies and re-evaluate relationships with Canada, Mexico and China, but it doesn’t call for any immediate executive orders to enact new economic measures. The Wall Street Journal summarized the memo, noting that U.S. federal agencies will “now assess the impact of the USMCA on American workers and businesses and make recommendations regarding America’s participation in it.” A review of CUSMA leaves uncertainty in the air for the Canadian supply chain, as it has been essential for trade and market access for our economy.

These are still early days in the next generation of Trump years, and time will tell if these tariffs will actually be implemented or if they are just more smoke and mirrors.

One silver lining in the political power changeover is the recognition from the Longshore Union Workers to Donald Trump for avoiding another potential port strike on the U.S. East Coast — an interesting approach considering Trump’s alignment with tech moguls like Elon Musk, given that the strike action was spurred by an overwhelming aversion to the implementation of tech and AI in the industry.

While these recent events give the illusion of division and uncertainty, Trump has united Canadians in a way I did not think possible. By suggesting we become the 51st state, he has unintentionally pushed the envelope for unity in a country that has been increasingly divided over the last five years. In an almost fortune-telling fashion, Environics did a study in 2022 showing that 83 per cent of Canadians disagreed with joining the United States. A new poll this month similarly found that only 10 per cent of Canadians support the idea.

Thanks for the renewed sense of patriotism, Mr. Trump. I’m here for it.