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“We’re going to see prices go up”: How Trump’s whopping 25 per cent tariffs would hit Canadians’ wallets

What a trade war could mean for your grocery bills, gas tank, investment accounts and more

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"We're going to see prices go up": How Trump's whopping 25 per cent tariffs would hit Canadians' wallets

Will he or won’t he? It’s the question Canadians have been asking themselves for weeks now with respect to Donald Trump’s much-touted plan to put a whopping 25 per cent tariff on Canadian goods. The decision would put a halt to the long-standing collaborative economic relationship that has benefited both countries for generations, and regardless of whether Canada goes through with plans to retaliate, it’s going to hurt. But how much? Economic slow down? Full-on recession? We put these and other pressing tariff quandaries to Danielle Goldfarb, an economics and trade researcher at the Munk School of Global Affairs and Public Policy.


Donald Trump said he was going to impose tariffs on Canada on day one of his presidency. Then he said February 1, or is it April 1? What’s going on, and is the confusion part of his plan? On his first day as president, Trump delivered his America First Trade Plan, which included a plan to study the impact of tariffs in a report that would be due April 1. That was seen as possibly good news here in Canada, particularly since so many of the things he had promised or threatened on day one did go through. But then, later that same day, it was a different message about wanting to impose 25 per cent tariffs as of February 1—something he repeated on the world stage at Davos. So we don’t know what to think. There have been commentators saying that the February 1 thing is a negotiating gambit, and then just the other day you had Trump’s commerce nominee, Howard Lutnik, saying that maybe Canada can avoid tariffs by taking action to tighten border security. But, then, Trump seemed to double down again. It’s whiplash.

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Is it possible this is all an elaborate April Fools prank? Ha—I wish. For a while there, I think there was this idea that maybe he’s not serious, maybe this is just bluster, a show of might with respect to the border. But at this point he’s just talked about it so many times: “Tariffs are a beautiful thing.” I think that, when we look at some of the objectives we know Trump is serious about—raising money so that he can fulfill his promises to cut taxes and bringing manufacturing back to the US—the idea that nothing will happen seems unlikely.

The other thing is that the uncertainty this conversation has created has already had an impact on the way investors see Canada. A big part of the draw for companies that locate here is our lower labour costs and educated workforce as well as uninterrupted access to the American markets. And that is also true of Canada’s own economy and the standard of living we have been able to build here—the opportunity and growth we have been able to foster are based in part on our proximity and unrestricted access to the world’s largest economy.

Let’s backtrack for a second. In the most basic terms, how do tariffs work? Tariffs are a tax put on the products that a country imports. They are paid by the company or the individual that imports them, and the money goes to the government. So if the US puts a 25 per cent tax on all Canadian products, that means everything coming into the US from Canada is going to be more expensive for Americans. The idea is that it’s a way of protecting domestic manufacturers and industries by disincentivizing the option of buying products from other countries, although in the case of Canada and the US, we often think in terms of making things together—integrated manufacturing with things like steel, cars, aerospace, pharmaceuticals, processed food. It’s not like, say, China and Canada or China and the US, where you’re importing finished products. When a car is being manufactured, it’s going back and forth over the border during different stages of the process.

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And a tariff would come into effect every time? Yes. I think that’s what some Canadians are laughing about—like, do Americans understand that this is going to make their cars a lot more expensive? Of course that is also true of cars in the Canadian market.

Do we know what products he might impose tariffs them on? What he has threatened is 25 per cent tariffs on all Canadian products. The hope is that the people working on this will be taking a more serious look at what actually makes sense. Does it make sense to put a tariff on Canadian energy, for example, when the cost is regulated by the Canada Energy Regulator and any additional costs go right to the American consumer? Or on a lot of integrated products, where the impact involves significant self-harm to the American economy? It’s hard to predict. We can look to the last time Trump placed tariffs on Canadian steel and aluminum, in 2018, although it might be dangerous to base our strategy on those negotiations since Trump seems to be working from a different playbook.

Meaning what? The previous tariffs were in place for a limited amount of time, and they resulted in the renegotiation of NAFTA, which is now the USMCA. This time around, Trump has made it clear that his motivation is to move production into the US, in which case high tariffs arguably make sense. On the other hand, a recent report showed how the US relies on Canada for its critical mineral strategy, so maybe disrupting that sort of beneficial partnership will give him pause. It’s been a real will he or won’t he.

What kinds of considerations are Canadian businesses that sell a lot to the US making at the moment? The concern there is that tariffs will make your product, whatever it is, 25 per cent more expensive to your US buyers, and that means demand will likely decline. So then you’re thinking in terms of how to cope. Are your profit margins such that you can absorb the cost of the tariffs? Or will you have to lower wages or cut jobs?

In terms of job losses, Doug Ford recently predicted a loss of half a million jobs in Ontario alone. Does that track? Well, certainly the auto sector is concentrated in Ontario, and if we do get a 25 per cent tariff, that industry is going to feel it. Again, the specifics depend on so many variables, so the numbers are hard to predict, but Ontario—as well as Alberta, with the energy sector, if a tariff is imposed on oil—is going to be affected more than other provinces.

If you’re looking into a post-tariff crystal ball, who gets hit first? There’s the question of the Canadian dollar, which has already taken a hit, and if that drops further, we’re going to see a fairly immediate jump in the cost of anything that is bought in US dollars, which includes groceries and potentially gas. In terms of lower wages and job losses, you’re looking at people in the manufacturing sector. One thing I didn’t mention is that tariffs apply only to actual physical goods that cross a physical border. A huge share of Canada’s economy is services based—doctors, architects, dog walkers—so that is not connected to manufacturing in a direct way, although eventually Canadians will have less money to spend on those services, and that’s where you get the bigger trickle-down where everyone is affected. If things cost more, you’ll cut back on what you spend. I’ve seen reports projecting a loss to our GDP of 0.5 per cent to 4.5 per cent.

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Which is what? A recession? A recession is defined as two consecutive quarters of GDP losses, but that’s something you can assess only in retrospect. At this point, we don’t know what will happen tomorrow, let alone about how we’ll retaliate or what the Bank of Canada is going to do. We don’t even know who our prime minister will be. We’ve definitely heard speculation about whether the government will look at supports to maintain stability and purchasing power—something like the CERB during Covid.

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What about investments? Could tariffs have an effect on, say, retirement savings? I don’t think we know. In moments of crisis, people may turn to safe-haven investments like gold, which has gone up. I think the bigger issue is if you lose your job because your company moves to the US and you’re later in your career.

We’ve heard a lot of talk about a trade war. Is that an official term or just a way to scare the living crap out of Canadians? I don’t know that that’s a technical term, but I think you’re looking at instances where one country introduces tariffs and then the affected country retaliates. It’s contrary to existing trade agreements, which in this case would be the USMCA.

Retaliation currently seems like the most popular course of action, with support from Doug Ford, Justin Trudeau and the various Liberal leadership candidates. Can you explain what that might look like? Even if we don’t retaliate, we’re going to see higher inflation and lower GDP. Without retaliation, the impacts are mostly on those Canadians companies that will be selling less in the US markets. If Canada retaliates, we are going to see prices go up on American goods selling here, with the idea being that this will hurt US manufacturers—but we’re also kind of punishing ourselves.

You’re telling me it’s time to stock up on Jack Daniel’s? Right. And you’ve probably seen that Doug Ford has threatened to take American booze off the shelves at the LCBO, which is not a tariff so much as a boycott. We’re in the middle of a chaotic leadership situation both provincially and federally, so everyone wants to show that they are strong. Retaliations may be politically popular, but who are they affecting most? Lower-income Canadians. We’ll have to wait and see, but I would assume the government is thinking in terms of how to deploy tariffs to have maximum impact without hurting low-income households. You don’t have to get your whisky from the US, but there are essential items that don’t have easy non-American alternatives.

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Chrystia Freeland has suggested tariffs on OJ, dairy and dishwashers. Why those things? The idea is to hit manufacturers in the parts of the US where they can have an impact, so places where Trump has a lot of followers or swing states where he has something to lose. It’s a political move as well as an economic one. Like maybe if orange juice manufacturers in Florida are feeling the burn, they’re going to pressure Trump to lose the tariffs.

Is that going to work? It’s very hard to win by retaliating, but it’s hard to see what other options we have.

A recent survey showed that 75 per cent of Canadian businesses were planning to raise their prices to combat tariffs, which seems like flawed logic given a predicted decline in purchasing power. Do they have any other options? It depends what you sell. But, if you’re selling something that can be sold elsewhere in the world, maybe you can look to other markets. The Canadian seafood company Clearwater Seafood has been very successful in Asia, for example. For such a long time, the US market has been a default with the benefit of proximity and a giant economy, but it’s not the only option. Or you can sell more in Canada—we still have a pretty big domestic market, we just haven’t had to rely on it in the way that we may have to in the future.

Doug Ford has encouraged Ontarians to buy Canadian as a way to stick it to Trump. Can this sort of thing make a difference? The US has such a huge domestic market, so it’s hard to make them feel an impact. I guess there is a possibility that certain sectors will feel it, but then you have the whole integrated manufacturing piece. Just because a product says “made in Canada” doesn’t mean it didn’t cross the border at some point. We live in a global supply chain, or at least that has been the norm for so many years. We’ll have to see what’s next.


This interview has been edited for length and clarity.

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Courtney Shea is a freelance journalist in Toronto. She started her career as an intern at Toronto Life and continues to contribute frequently to the publication, including her 2022 National Magazine Award–winning feature, “The Death Cheaters,” her regular Q&As and her recent investigation into whether Taylor Swift hung out at a Toronto dive bar (she did not). Courtney was a producer and writer on the 2022 documentary The Talented Mr. Rosenberg, based on her 2014 Toronto Life magazine feature “The Yorkville Swindler.”

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