With former President Donald Trump resuming threats of imposing steep tariffs on Canadian goods, businesses and economists alike are bracing for significant economic repercussions. Following his re-election, Trump has reiterated plans to introduce 25% tariffs, which, according to experts, could push Canada toward a recession if implemented.
“If Trump were to carry out those 25 percent tariffs... unfortunately, a recession in Canada would be inevitable,” warned Stephen Brown, deputy chief North America economist at Capital Economics, speaking to Global News. The looming possibility of these tariffs has cast uncertainty over Canadian businesses, which are already facing challenges due to inflation and fluctuative market conditions.
The Bank of Canada is currently caught between managing inflation and responding to these trade threats. Economists anticipate the central bank will possibly lower its benchmark interest rate again, though cautiously. By the end of January 2025, the bank held interest rates at 3.25%, which is at the top of the neutral range, leaving little room for maneuvering amid fears of economic slowdown.
Investment plans by businesses could be curtailed simply due to the uncertainty created by these tariff threats, even if they don't come to fruition. “Businesses are likely to slow their investment... two in five expect negative impacts from Trump’s presidency,” noted Benjamin Reitzes, managing director at BMO, confirming the widespread apprehension within Canadian markets.
Trade relationships between Canada and the U.S. have long formed the backbone of both economies, with Canada exporting approximately 60% of its agricultural production to its southern neighbor. Products like greenhouse vegetables, beef, pork, and canola oil are among those significantly impacted by the potential tariffs. The interconnectedness of agricultural sectors compels mutual dependency — if farm costs rise due to tariffs, consumers will inevitably feel the financial pressure at grocery stores.
Drew Spoelstra, President of the Ontario Federation of Agriculture, emphasizes the need for unity across Canada: “We’re all in this together. We need a Team Canada approach.” He advocates for proactive solutions between agricultural stakeholders and the government to mitigate negative fallout from possible tariffs.
Surveys conducted recently highlight the gravity of this situation, indicating considerable concern among farmers and agri-food stakeholders. Increased costs resulting from new tariffs could strain the resilience of the Canadian agricultural sector, which is already challenged by environmental factors and regulatory burdens.
The broader economic outlook hints at vulnerability due to external pressures like these tariffs, reflecting concerns voiced by experts and economists. “Our country faces the most serious threat to its sovereignty and economic prosperity since the Second World War,” warned the Expert Group on Canada-U.S. Relations, indicating the imperative need for strategic adaptation to the shifting economic policies under Trump.
Thomas d’Aquino, who has extensive experience with cross-border business initiatives, stated, “Canada needs to take the initiative and generate bold ideas...” His sentiments echo the calls for increased economic resilience amid potential tariff conflicts. This scenario paints the picture of how deeply interwoven the economic destinies of Canada and the U.S. remain amid shifting political landscapes.
Even if tariffs don’t materialize, the capacity for Canadian businesses to thrive hinges on the outlook for trade stability moving forward. Policymakers are urged to reconsider and bolster trade agreements, fostering diversification and resilience against any unilateral moves like tariffs.
Both industries and governments must collaborate more than ever to turn the tide of these potential economic challenges. Federally and provincially, steps must be taken to alleviate pressures on farmers and businesses facing increased operational costs and changing market conditions.
Canada stands at a pivotal moment, characterized by uncertainty under the looming shadows of possible tariffs and heightened tension between two nations known for their long-standing economic partnership. Without decisive action and stakeholder unity, the path moving forward may be fraught with challenges all Canadians will feel well beyond the agricultural sector.