When it comes to a potential trade battle with the U.S., Canadian officials are planning a response that’s more “eye for an eye” than “turn the other cheek.”
What happened: The federal government is readying a plan to slap tariffs on nearly every import from the U.S. should Donald Trump follow through on plans to levy a 25% tariff against all Canadian goods.
- Canada is the largest national importer of U.S. goods, buying more than US$320 billion worth of American-made products last year. Vehicles, consumer goods, and chemicals and plastic made up more than half of that total.
Why it matters: Full-scale retaliation would inflict damage on the U.S. economy, but Canada will suffer more in an all-out trade war — Scotiabank estimates the toll may rise to nearly 6% of Canada’s GDP in such a scenario.
- Dollar-for-dollar tariffs would drive up the cost of U.S. imports for Canadian consumers and push up inflation, forcing the Bank of Canada to raise interest rates, Scotiabank forecasts.
Yes, but: If a hard-hitting reprisal pushes America to drop its tariffs sooner (or forego them altogether), it could be worth accepting the short-term pain. That’s the difficult calculation policymakers will face should the Trump administration follow through on its threats.—TS