Tariffs and Counter-Tariffs: Industries Caught Between a Rock and a Hard Place

With the US administration blowing hot and cold since President Trump was sworn in, Canadian businesses are dealing with a high level of uncertainty. Tariffs are implemented and then put on hold (the list of tariffs is changing by the day) while adjusting to Canadian responses. In this Economic Viewpoint, we explore the anticipated sectoral impacts of announced Canadian counter-tariffs, which come on top of the impact of US tariffs. While the US tariff shock will have the biggest impact on the Canadian economy, we shouldn’t overlook the negative repercussions that counter-tariffs and a weaker Canadian dollar will have on businesses sourcing from the United States. Some industries are caught between a rock and a hard place, risking a drop in US demand for their products and an increase in their supply costs if substitutes are not easily found. This is the case for food manufacturing, machinery, plastics, chemicals, automotives, aerospace, wholesale trade, and animal and crop production (summary table¹).

¹ For the purposes of the sector analysis, we have assumed that the tariffs announced on March 4, which already apply to 62% of Canadian exports to the United States, will be expanded to all goods in April. This will include motor vehicles and other products that are compliant with Canada–United States–Mexico Agreement (CUSMA) (for which tariffs are currently postponed).