As the federal government ponders a round of tit-for-tat retaliation against Donald Trump‘s threats to impose tariffs on Canadian products, business organizations warn that going too far would hurt businesses and consumers on both sides of the border.
While some retaliation is warranted if Trump imposes a 25 per cent across-the-board tariff, an all-out trade war would be a mistake, said Dennis Darby, CEO of Canadian Manufacturers and Exporters (CME).
“It’s like cutting off your nose to spite your face,” said Darby.
The federal government is looking to target American steel, ceramics and plastics with retaliatory tariffs in response to an escalating trade dispute with the incoming Trump administration.
A senior government official says the list — which also includes orange juice — is not final and that Ottawa has made no decisions on retaliation.
According to Statistics Canada data supplied by the federal ministry of Innovation, Science and Economic Development, Canada imported a total of $149.7 million of orange juice from the U.S. in 2023, the most recent year for which annual statistics are available. It also imported $16.5 million in sinks, urinals, toilets and bidets made from either ceramic or porcelain.
While neither of those categories are a particularly large chunk of the $373.7 billion in imports Canada brought in from the U.S. that year, it’s not a coincidence that they’re in areas where consumers would likely notice, argued Darby.
“Consumers would be most affected by tariffs on finished products,” said Darby, adding that CME members are more concerned about potential tariffs on raw materials or parts coming in from the U.S., including steel.
Many goods cross the Canada-U.S. border several times en route to their ultimate destinations, Darby pointed out.
“Our biggest concern would be intermediate products. Our members import a lot of materials from the U.S. And they export a lot of finished products,” said Darby.
While imposing retaliatory tariffs might be tempting, the head of the country’s biggest small-business association worries that it could lead to rising prices here, just as inflation is easing.
“We’re concerned about food prices, housing prices and housing construction, and they’re talking about hitting orange juice, sinks and toilets?” said Dan Kelly, president and CEO of the Canadian Federation of Independent Business.
Import tariffs would in many cases be rapidly passed along to consumers, said Kelly.
“You’d see it reflected in consumer prices pretty quickly,” said Kelly.
But, he added, small businesses have less wiggle room than their corporate counterparts when it comes to setting prices. That means that some of them might just end up eating some of the increased costs.
“Our members don’t have the kind of pricing power that bigger companies do. So some of them would have to swallow it, at least at first,” said Kelly.
For consumer-facing businesses such as retailers, the dilemma is potentially more acute, said Karl Littler, senior vice-president at the Retail Council of Canada.
A trade war would potentially be a triple-whammy for retailers, Littler said. In addition to the increased costs on goods from the U.S., retailers could also be hit by a slumping economy and tanking loonie, he added.
“A lot of what they source from elsewhere is priced in U.S. dollars, so if the loonie’s tanking, that hits them,” said Littler. “If the economy takes a dive, that hits demand, too.”
And while business groups generally frown upon tariffs, in this case, they’re warranted, said Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce. The nice-guy, glad-handing approach just isn’t going to work with Trump, Holmes said.
“The goodwill tour? It’s fatuous and ineffective. We need to be serious, and tariffs have to be part of it,” said Holmes.
But an organized, planned approach is a lot harder when there’s a power vacuum in Ottawa, thanks to Justin Trudeau’s decision to resign and spark a Liberal leadership race, Holmes said.
“It’s really not helping. It couldn’t have come at a worse possible time,” said Holmes. “Every call that’s being made to gauge leadership support is a call that’s not being made to work on maintaining our most important trade relationship.”
With files from The Canadian Press
