A new Canadian Chamber of Commerce report says protectionist policies like tariffs proposed by Donald Trump could hurt economies on both sides of the border ahead of the U.S. presidential election. He is issuing a stern warning.
The report, authored by Trevor Tombe, an economics professor at the University of Calgary, found that while most Canadians recognize the importance of trade with the U.S., Americans are especially concerned about how complex the two countries are, especially during this time of crisis. He said they don’t have the same understanding of what is connected. Geopolitical uncertainty.
Tombe said the tariffs could have a huge impact on Canada’s two biggest economic sectors, energy in Alberta and car production in Ontario, and that the former U.S. ambassador said one of the presidential candidates is far north of the border. It has even warned that this could have dire consequences for oil and gas production. .
Canadian officials and business groups are meeting with Democratic and Republican officials from across the country to ensure Canada is prepared for any outcome of the November election.
Both presidential candidates are campaigning on protectionist policies that could create uncertainty for Canadian trade. Whoever takes the White House will be responsible for the 2026 review of the Canada-U.S.-Mexico Agreement.
“Both parties have been moving in a protectionist direction for some time,” Tombe said.
Vice President Kamala Harris is expected to stay close to the Biden administration’s policy on relations with Canada, but last month she approved a NAFTA replacement plan negotiated under the Trump administration that would allow major auto companies to outsource U.S. jobs. He emphasized the opposite position.
Tariff proposals raise concerns
Meanwhile, President Trump has indicated plans to impose a flat 10% tariff on imported goods if he wins a second term.
The proposal caused concern on both sides of the border.
Kirsten Hillman, Canada’s ambassador to the U.S., sought to allay concerns, saying it was probably not feasible for the U.S. government to apply tariffs in Canada’s case.
Tombe said President Trump’s tariffs, if implemented, would have a negative impact on economies on both sides of the border.
The report uses models to estimate the impact if the tariffs become permanent, and suggests that the measures would reduce the size of Canada’s economy by 0.9% to 1%, resulting in an annual economic cost of about $30 billion. I am doing it.
The report estimates the economic cost to the United States to be approximately $125 billion annually.
The situation will only get worse if other countries retaliate with their own tariff walls. In that case, Canadian income would fall by 1.5 per cent and productivity would fall by 1.6 per cent, the report said.
“Canada has lost $45 billion in economic activity,” Tombe said. “Roughly speaking, this is about half the size of a normal recession. This is a pretty big blow.”
This is not the first time such a policy has been introduced in the United States.
Tombe pointed to the 1971 “Nixon Shock” when the United States temporarily imposed a 10% surcharge on imported goods, including those from Canada.
At the time, as now, Canada sought exemption because of its unique and essential role as a trusted trading partner.
Although President Nixon’s tariffs lasted only four months before being lifted, the study found that total imports from Canada to the United States decreased by 2.6%.
Tombe said the impact is likely to be even greater today because the nature of trade between the two countries is more complex and connected.
Some experts have warned that Canada’s decline in importance relative to other parts of the world has shifted the relationship from a strategic to a transactional one.
The new report said the economic relationship between Canada and the United States is extensive, deeply interconnected and mutually beneficial.
The report says it consists of a “complex web of supply chains that span many sectors,” with Canadian exports used as raw materials for U.S. companies to produce other goods.
“Canada-U.S. trade has cascading effects across the U.S. economy, with Canada serving as an important and reliable supplier of inputs,” the report said.
energy and cars
Some cross-border investments and exports in service sectors such as tourism and technology are difficult to track.
While the overall U.S. economy is large and generally less dependent on international trade, Canada is the largest export destination for 34 states.
In Michigan, trade with Canada represents 14 percent of the state’s economy. The rate is 10.2% in Illinois and 6.7% in Wisconsin.
Many Midwestern states are key election battlegrounds, and trade policies affecting Canada will have a disproportionate impact on businesses and citizens.
“The impact of the disruption is very similar on both sides of the border,” Tombe said.
Bruce Heyman, the former U.S. ambassador to Canada, also warned in an interview Tuesday of the potential impact if President Trump’s tariffs were applied to anything, including oil.
“I don’t think people fully understand what it means,” said Heyman, who held the position from 2014 to 2017. “The risks to Alberta and the rest of Canada are very high. “I think it could have a significant negative impact on the economy,” he said. , on CBC Radio Calgary’s eye-openers.
“You might think he’s pushing fossil fuels over renewable energy and other things, but I can tell you he’s pushing America First and taxing all imports. It’s very clear, and I believe that includes oil.”
If that happens, it could have far-reaching implications for the local and Canadian economy, Tombe said.
“Most of the oil produced in Alberta is sent to the United States by a very large margin, so a 10 per cent tariff would impact producers here, but to what extent? It depends on the amount.” [of a] U.S. refineries will be hit.”
Ontario, and to a lesser extent Manitoba, could also feel the broader impact of the tariffs in their respective auto and transportation industries.
“We estimate that our exports to the United States will decline by about 20% as a percentage of our production. This is a huge deal, as it represents one-fifth of our overall business.”
