With just over a week to go until another round — or two or three — of U.S. tariffs, Canadian businesses are worried, but still don’t know exactly what they’ll face.
April 2, which U.S. President Donald Trump has referred to as “Liberation Day,” is when 25 per cent across-the-board tariffs on imports from Mexico and Canada are scheduled to come into force.
It’s also the day when a wide range of sector-specific tariffs are expected, as well as “reciprocal” tariffs on U.S. trading partners around the globe.
The looming levies — and uncertainty over which ones will actually be put into effect — is already damaging Canadian companies and the economies of both nations, business leaders say.
“It’s incredibly destabilizing,” said Matthew Holmes, head of government affairs at the Canadian Chamber of Commerce. “It’s creating all kinds of chaos.”
And the scale of potential “reciprocal” tariffs is hard to estimate, said Holmes, because Trump and his advisers haven’t laid out a precise measure of what they’re referring to.
“It’s hard to really understand exactly what they mean when they talk about reciprocal tariffs as it pertains to Canada,” said Holmes.
Reports citing U.S. sources say Trump’s administration is considering delaying sector-specific tariffs. U.S. treasury secretary Scott Bessent also suggested over the weekend that 25 per cent across-the-board tariffs could drop to 15 per cent.
Those reports, while some relief, should come as little consolation to Canadian workers and businesses, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
“I don’t read the news as any relief. I read it as additional lack of clarity,” said Volpe. “Any one of the tariffs is a major threat to the Canadian economy,” adding that the U.S. could also impose tariffs under the Canada-United States-Mexico trade agreement. “The tariff rate in CUSMA is currently at zero, but it’s still there.”
Dropping across-the-board tariffs from 25 per cent to 15 per cent, said Volpe, would still wipe out the profit margin for his members.
“I take no comfort whatsoever that Bessent is musing about lowering the threatened tariffs from four time the profit margin of Canadian automotive advanced manufacturing to two-and-a-half times,” Volpe said.
Just the threat of tariffs on the highly-integrated automotive sector, says Volpe, has led to a “general paralysis” in companies on both sides of the border.
Even companies eyeing a move south of the border to escape tariffs face a huge risk, Volpe added.
“The simple-minded idea that this is going to create some boom in the U.S. doesn’t match with the risk profile,” said Volpe. “The president is playing with the validity of the rule of law. He is flirting with a recession. He’s tempting inflation.”
In a sector where some components cross the border several times from raw material to finished vehicle, tariffs could grind production across the industry to a halt within a week, said Volpe.
For the Canadian steel industry, the pain of tariffs — including layoffs — has already begun.
On March 12, the U.S. hit global imports of steel and aluminum with across-the-board 25 per cent tariffs.
The head of the Canadian Steel Producers Association said the existing tariffs are already damaging, and is dreading the prospect of even more.
“Twenty five per cent is already very painful,” said CSPA president Catherine Cobden. “Adding anything to that … is going to have a catastrophic effect on the industry.”
Some companies, including Sault Ste. Marie-based Algoma Steel, and Ivaco, based in L’Orignal, Ont., have already started tariff-related layoffs.
And, said Cobden, the effects of the tariffs are already being felt south of the border as well.
“It’s already causing price escalation in the U.S., and there’s a supply crunch.”
