Rhonda and Will Herdman picked up a container of dates at a downtown Loblaws Tuesday, but quickly put it back after reading the label: “Product of USA.”
Now that U.S. President Donald Trump’s tariffs are here, the couple may be anxious about the future of the Canadian economy, but are willing to spend more if it means not giving “a single dollar,” to the U.S.
“It feels like having a friend stab you in the back,” Will said, adding that he thinks Ottawa should seek new trading partners due to Trump’s unpredictability. “The guy is screwing over Canadians. And he’s screwing over Americans.”
Millions of Canadians woke up Tuesday to discover Canada had entered a trade war with its closest trading partner, the likes of which has not been seen since the Great Depression.
The fallout of Trump’s tariffs means some sectors will face mass layoffs due to declines in business investment and demand for Canadian exports to the U.S., while many goods and services are about to get more expensive in the wake of Canada’s retaliatory levies.
“Trump’s tariff hammer will come down hard on Canada’s economy,” warned Douglas Porter, chief economist at BMO, adding that the bank is now forecasting a “modest recession” in Canada.
The Canadian industries to be hit first — and hardest — include the auto sector, which experts say could come to a halt within days, as well as aluminum, medicines and wood products. (Oil and gas are exposed but were slapped with a lower tariff of 10 per cent.)
Workers at the General Motors CAMI Assembly plant in Ingersoll, Ont. were already told to stay home for two weeks ahead of Tuesday’s tariffs due to “volume correction,” Mike Van Boekel, chair of the plant’s local Unifor union, told the Star.
Now, Boekel fears he and other workers won’t be back anytime soon.
“If 25 per cent tariffs stay,” said Boekel, “I would think the whole industry will shut down within a week or ten days.”
BMO’s Porter and other economists expect the national unemployment rate to peak at around eight per cent in the next 12 months.
Many experts are also saying the negative economic outlook might be enough to prompt the Bank of Canada to slash its key interest rate on March 12 in a bid to stimulate the economy.
A trade war puts the central bank in a tough spot, economists say, as Canada’s counter-tariffs, paired with a plummeting loonie, would likely ratchet up inflation.
Pedro Antunes, chief economist at The Conference Board of Canada, says he expects Canada’s average annual inflation rate in 2025 would rise by 30 basis points, to 2.1 per cent from 1.8 per cent, if the tariffs last for just three months.
Effective Tuesday, Canada’s first-round of $30 billion in retaliatory tariffs target a long list of U.S. food products, including citrus, poultry, eggs, dairy, tomatoes and coffee.
But food executives have stressed that the first round of tariffs won’t spike grocery bills in Canada, since most of the U.S. products on the list can be easily swapped for Canadian-made alternatives, or imports from other countries.
Ottawa is also promising a much longer list of tariffs on an additional $125 billion in U.S. goods if the trade war persists, which could include U.S. beef, some lettuce, fish, diapers and nuts, according to a draft released on Tuesday. (The draft list is subject to 21 days of consultations.)
The impact of those tariffs could take weeks, if not months, to hit Canadian grocery shoppers as major grocers require a long lead time to evaluate any request from a supplier looking to increase its prices.
Loblaw, for instance, has said American-made products only represent about 10 per cent of its cost of goods, and it’s already working to find alternatives.
But the one American import that will be hard for Canadian grocers to fully replace is produce, particularly at this time of year.
Importers have warned that Canada is heavily reliant on U.S. growing regions for its winter produce like lettuce.
And last month, Loblaw CEO Per Bank suggested they might only be able to find alternatives for half its U.S. suppliers.
A further depreciation in the Canadian dollar could also jack prices of imported goods as well as raise the cost of travel to the U.S., said Shaun Osborne, chief currency strategist at Scotiabank. It’s already forcing some snowbirds to sell their homes in Florida.
But Osborne said he doesn’t expect the loonie to weaken significantly more than it already has — from $0.72 as of November 2024 to $0.69 currently.
“The fact that there’s been a pretty — so far, at least — tepid reaction from markets suggests that some investors are feeling at the moment that this 25 per cent tariff regime is not one that will be there for the long run.”
