Canada braces for fallout from tariffs
Auto industry could be among sectors hardest hit in trade dispute
With retaliatory tariffs on US goods going into effect on July 1, Canadian industries from automobiles to groceries will bear the brunt of an ongoing trade dispute between North American allies, some experts have said.
The tariff list on $16.6 billion worth of items includes a 25 percent surtax on more than 100 steel and aluminum products and a 10 percent surtax on more than 70 other goods.
According to Canadian economists, the manufacturers who use steel and aluminum, and potentially the automobile industry, would be the most vulnerable sectors.
Brian DePratto, senior economist at TD Economics, wrote that the biggest risk is for manufacturers who make steel and steel-based products.
Because it’s a far more competitive industry, and steel and metal components can cross the border several times before being made into finished products, the tariffs could have a deleterious effect on economic output, leaving the economy effectively at a standstill for half a year, he wrote.
The Canadian auto sector has enjoyed a long history of access to the US market. US auto manufacturers — such as General Motors, Ford and Fiat Chrysler — have substantial factories in Canada.
“It’s a highly integrated industry. The consequences are more severe,” DePratto said.
DePratto also estimated a 0.1 percentage point increase in inflation from the tariffs, but “the rise is very small when compared to other drivers such as energy prices or changes in the exchange rate”.
Consumer items
The tariffs also apply to consumer items such as whiskey, chocolate, pizza, ketchup, yogurt, beef, coffee, orange juice, maple syrup, salad dressing and soups.
While Canada’s tariffs read like a grocery shopping list, political observers have pointed to its strategic targets.
For example, Republican Senate Majority Leader Mitch McConnell represents Kentucky, a state with a sizable bourbon whiskey industry. And Vermont, with its established maple syrup industry, is represented by independent Senator Bernie Sanders, who is an outspoken voice in Congress.
Dairy is one of the sticking points between the US and Canada in renegotiation of the North American Free Trade Agreement, or NAFTA. Canadian imports of yogurt from the US totaled $3 million last year, and most came from a plant in Wisconsin.
Canadian Foreign Affairs Minister Chrystia Freeland has criticized the US tariffs, saying the Canadian reaction was “perfectly reciprocal” and “sorrowful”, although that could turn to anger if the situation is prolonged.
Ken Neumann, the national director of United Steelworkers of Canada, said that the retaliatory move is “a step in the right direction as it showed the US that we’re not going to be pushed back”.
On Canada Day, July 1, in Regina, Public Safety Minister Ralph Goodale said the tariffs were designed to offer a clear message that the Trump administration’s trade action is “illegal and absurd” and that Canada is retaliating dollar-for-dollar.
“We will not just be victims of American policy; we’re going to fight back,” he said.
According to the Globe and Mail, recent tensions with the Trump administration have made Canadians realize that the United States is moving to a new model of global engagement rooted in self-interest. Canadian policymakers can no longer assume special treatment because of the longstanding relationship with its neighbor, the newspaper said.