The Canadian economy may face long-term repercussions if the United States proceeds with sweeping tariffs, according to Tiff Macklem, the governor of the Bank of Canada. Speaking to members of the Mississauga Board of Trade and the Oakville Chamber of Commerce, Macklem warned of the potential structural changes these tariffs could wreak on Canada’s economic framework.
Distinguishing this scenario from the turbulence caused by the COVID-19 pandemic, Macklem stated, “This time, if tariffs are long-lasting and broad-based, there won’t be a bounceback.” He emphasized the importance of the export sector, noting, “With exports to the United States accounting for roughly one-quarter of our national income, the shock would be felt across Canada.”
The economic outlook is grim, with the Bank of Canada estimating as much as an 8.5 percent decline in the first year following the implementation of broad-based tariffs. This decline, Macklem predicted, would lead to cut production and layoffs within the affected industries. “We may eventually regain our current rate of growth, but the level of output would be permanently lower,” he cautioned, highlighting the long-lasting ramifications tariffs could have on Canada’s economy.
Inflation could also rise as Canada enacts its retaliatory tariffs, impacting consumer spending significantly. With projections indicating up to 2.5 percent decline by mid-2027, the governor expressed concern: “Consumer spending on everything from cars to entertainment and housing would slow.” Macklem noted these factors would contribute to decreasing household income across the nation.
While the economic situation appears dire, Macklem suggested Canada might find some respite by implementing structural changes at home. He advocated for removing barriers to interprovincial trade, which could potentially offset the increased trade friction with the United States. He stated, “Provinces could also make it easier for workers to move within Canada by mutually recognizing different labour accreditations.”
The reality of US-Canada relations can be complicated, as underscored during Presidents Day 2025, at a Tim Hortons located near Philadelphia, the closest Canadian stronghold to former President Donald Trump’s residence. More than just popular coffee, the Canadian chain has established over 700 cafés across the US. The cultural significance of the brand remains evident, with designs reminiscent of Canada splattered across menus and decor.
A visit to this café revealed interesting opinions among patrons about tariffs and Canada’s relationship with the USA. Many remained unaware of the tensions affecting these two nations and viewed the relationship largely positively, with polls indicating 54 percent of Americans describe Canadian relations as “best friends” or “close friends.”
A survey from Visual Capitalist found public sentiment leaned against proposed tariffs, with only 28 percent of Americans considering them favorable. “Canada’s our neighbor,” said one customer, “It’s always easier to be friends.” The atmosphere here seemed devoid of any discussion around the ramifications of tariffs, or even hockey, indicating how deeply personal views on Canada can wax and wane.
When probed about the concept of Canada becoming the 51st state, responses varied widely. Several customers expressed enthusiasm about the idea, indicating they perceived potential benefits from such unification, particularly concerning health care initiatives. A woman recalled the allure of moving to Canada due to its beautiful landscapes: “The mountains! The forests! I hear the people are friendly,” she said, reminiscing about her youth.
Yet, others were undoubtedly skeptical about any verbal notion of annexation. “We can’t let Canada become part of us, it’s its own country,” expressed another patron. Their immediate concerns centered around the reality of annexation prompting major shifts within each country.
Diane Lacombe, another café-goer, articulated her ambivalence: “It would be a lot to swallow.” Her comments reflect the larger parental sentiments concerning Canada’s status, echoing the complicated emotions Americans have toward the relationship they have with their northern neighbor.
The unity between Americans and Canadians is more complex than just interwoven economies and cultures. Across Tim Hortons locations, it is evident there are comfortable intersections of collaboration marred by political discord.
Back home, Macklem's dire warnings about tariffs echo deeply through the Canadian economy. He pointed out how businesses will involuntarily tighten their belts, curtailing investment and eventually changing the structure of the domestic marketplace. Amid all this economic unrest, the contrasting feelings of local patrons reveal larger dimensions to the economic relationship – one saturated with respect yet shadowed by distance.
What remains clear is the fragility of this relationship, as economic indicators teeter on the edge of change, and sentiments between countries waver like the distance between cups of coffee across the 49th parallel.