Dan Kelly was sitting in the car Saturday night, absorbing the news of an explosive trade war erupting between Canada and the United States, when yet another desperate email landed in his inbox. Kelly, head of a group representing small Canadian businesses, had been fielding questions left and right: what does this mean? What do we do? But the note, from a small collectible and second-hand book seller based in Toronto, was agonizing.
Upwards of 20 per cent of his sales were to American customers, the man wrote. They surely wouldn’t pay more for the product itself, especially considering shipping costs. If his products were tariffed under the new rules — though it was unclear, mere hours after the news, if they would be — he couldn’t see a way of absorbing the cost while paying the monthly fees to list his wares online. The man seemed resolved his business would be done.
As Canadians brace themselves for the wallop of the White House’s punishing tariffs and Canada’s retaliation, the impacts are widely expected to be devastating — putting hundreds of jobs in major industries like automotive manufacturing on the line, depressing the Canadian dollar, and increasing the sticker price of countless everyday items. But Kelly also sees haunting echoes of the COVID-19 pandemic: amid the bigger storm, he expects to hear more stories of heartbreak and financial ends no longer able to be pinched together.
“There are a million micro-stories like this,” Kelly lamented on Sunday. “This guy is now considering whether he has a future in his business, because his model will effectively be broken by these tariffs.”
As of Sunday, businesses, workers and officials were still scrambling to understand the details of the dual tariff action, with both countries planning to begin imposing their new surcharges as of Tuesday. The U.S. tariffs add a 25 per cent surcharge to nearly all Canadian goods, except a lowered 10 per cent tariff applied on Canadian energy products. Canada hit back with immediate 25 per cent tariffs on $30 billion of American goods, with plans to slap tariffs on another $125 billion worth of products from the U.S. in three weeks’ time.
The fallout for Canadian jobs remains to be seen, but industry players are nervous. Dennis Darby, CEO of Canadian Manufacturers and Exporters, said Sunday that 800,000 Ontarians alone work in a manufacturing sector that has a heavy reliance on the U.S. market. “I don’t think anyone is feeling very confident right now,” Darby told the Star. “These are really uncertain times.”
Some changes will be visible as people go about their lives. Ontario is pulling American alcohol off the shelves at the LCBOs this week, and will no longer make it available wholesale to restaurants and other retailers. Canada has released the list of products to immediately face counter-tariffs coming across the U.S. border, from grocery items like mandarins, tomatoes, cucumbers and yogurt to tires, plywood, carpets, baby clothes, suit jackets, mittens and belts.
More is still to come, with the federal government promising to soon release the list of products tariffed after 21 days for public comments. That list will include personal vehicles, trucks, buses, steel and aluminum, more fruits and vegetables, aerospace products, beef, pork and dairy products, officials say.
Larry Davidson works as an importer at the Ontario Food Terminal, and at this time of year, his team sources most of their fresh produce — in their case, largely focused on grapes and stone fruits — from markets outside of North America. So, for now, he’s not expecting too much disruption, though he can’t say the same for colleagues specializing in importing American citrus fruits.
But if this trade war stretches into the warmer months, he’s not sure how they’ll make it work. “It will be anywhere from impossible to barely manageable for people like us,” Davidson said. To make up the added costs on a product like stone fruits imported from California, he said consumers could see a case that cost $3.49 last summer increase in price by at least a dollar, maybe more. Watermelons and strawberries, emblems of summer sweetness, could also burn a bigger hole in shoppers’ grocery budgets this year, he said.
Sure, people could buy other fruits, Davidson cautioned — but at a time when Canadian households have already been feeling a cost-of-living squeeze, he sees it as yet another question a household needs to ask about necessity.
Canadian farmers are likely in for a hard time ahead too, Davidson added, pointing as an example to carrot farmers who rely on U.S. buyers. “All the local carrot growers, they’re going to have to hope their customers are willing to pay that extra 25 per cent, which is unlikely considering carrots are a real commodity and can be sourced from other places,” he predicted.
It’s a reality that has put the country’s agriculture community on high alert. The Canadian Federation of Agriculture, in a statement, flagged extreme concern over the impact of the trade war. Like homebuilders and other business groups, they’ve turned to the federal government and expressed hope that new supports are rolled out to help “weather this storm.”
Michael Graydon, CEO of Food, Health and Consumer Products of Canada, expects Canadians will feel the impacts of the looming trade war in many aspects of their lives. “Everything, from a household perspective, is going to go up — whether it’s electronics or buying a new fridge,” Graydon said. “One of the biggest issues that we will continue to have to deal with is the Canadian dollar through this is continuing to decline — (impacting) our power to buy.”
Graydon sees the tariffs as a wake-up call, and argues the trade tensions should prompt officials to take a hard look on Canada’s reliance on the U.S. “We are, in Canada, the David here in the fight versus Goliath,” he said.
The trade war also threatens to worsen existing economic challenges, including development slowdowns in housing due to higher interest rates, labour and material costs. The cost of building new homes will rise further in the face of tariffs on steel and aluminum imports, said Dave Wilkes, president of the GTA-based Building Industry and Land Development Association.
“The industry is already struggling with a ‘cost to build’ crisis where due to inflation in construction and financing costs the financial viability on new home projects is challenged and it is next to impossible to bring new homes to market at price the market can and is willing to absorb,” Wilkes said.
The province’s residential construction council, on Sunday, noted housing materials flow both ways across the Canada-U.S. border, with Canadian homes relying on American materials and American homes relying on Canadian lumber along with other materials like cement and gypsum for drywall.
While Canadian builders could look to other sources, including domestic producers, council president Richard Lyall warned the disruption and heightened costs could lead to delayed or cancelled developments. “Such a scenario could exacerbate existing housing shortages and drive-up prices.”
As these big questions swirl, Davidson can’t help thinking — like Kelly — of the fears percolating through private households, and the toll this international rift could take on smaller businesses. A mom-and-pop operation likely didn’t have the resources to stock up on product before the trade battle begins, he said, or quickly pivot supply chains to source products from non-U.S. markets.
“It’s the average small company that could really just be forced out of business, and the jobs that will be lost,” he said. “That’s really the sad story here.”
