VIDEO A new round of 50 per cent tariffs on nearly $20 billion of Canadian goods are scheduled to go into effect at 12:01 a.m. on Wednesday unless a deal can be reached between Canadian and U.S. trade negotiators . The duties are being imposed through three proclamations signed last month by U.S. President Donald Trump, who claimed the tariffs are in response to Canada’s “discriminatory treatment of U.S. commerce” on three fronts: alcohol, automobiles and dairy products. Here’s what top economists are saying about the potential impact of the new tariffs and what Canada might do in response.
How will the tariffs affect Canada’s economy? The new tariffs are expected to impact a wide range of Canadian goods, from Canadian wine and whisky to cement and hockey sticks.
According to an analysis by BMO Economics senior economists Shelly Kaushik and deputy chief economist Michael Gregory, the largest impacts will be in the following sectors:
Chemicals and plastics Electronics and related equipment Consumer goods Forestry and wood products Machinery and industrial equipment Agriculture and food Other manufacturing “Ultimately, the impact on Canada’s economy will rest on the extent (and duration) of these tariff threats,” Kaushik and Gregory wrote. ” his comes just as growth looked to be finding its footing more than a year into the trade war and months into the Iran war-driven energy price shock.”
Economists have different forecasts on the tariffs’ potential impact on Canada’s economic growth.
Kaushik and Gregory said the tariffs could reduce annual real gross domestic product growth by roughly 0.5 percentage points if implemented in full.
Andrew Hencic, director and senior economist for TD Economics, said the tariffs will likely take 0.3 to 0.6 percentage points off GDP growth over the next year if they are imposed and maintained.
A Desjardins analysis was less pessimistic, finding that the tariffs could reduce real GDP growth 0.2 percentage points in 2026 if they go ahead as planned.
Real gross domestic product growth is currently projected to rise from 0.7 per cent in 2026 to around 1.8 per cent in 2027 and 2028, according to the Bank of Canada’s latest Monetary Policy Report, which was published before the tariffs were announced.
Will there be job losses? Economists said the tariffs would slow economic momentum and weaken business investment, which would negatively impact Canada’s labour market .
A report prepared for the Canadian American Business Council by Oxford Economics outlined three scenarios: a status quo situation where tariffs remain in place, a situation where the Canada-U.S. Mexico Agreement (CUSMA) breaks down and a situation where CUSMA is successfully re-negotiated and the trade relationship improves.
The report projected 102,000 Canadian jobs and 214,000 U.S. jobs would be lost if the Canada-U.S.-Mexico Agreement (CUSMA) breaks down. However, if CUSMA is successfully re-negotiated and the trade relationship improves, it would add around 98,000 jobs in Canada and 137,000 jobs in the U.S.
“Weaker trade and investment feed quickly into hiring,” the report read.
An RBC Economics analysis estimate the tariffs could hurt around 20 per cent of production and jobs in manufacturing sectors that will be impacted by the new tariffs. This includes sectors like apparel, leather and allied product manufacturing, electrical equipment and appliances manufacturing and textile and textile mill products manufacturing.
Canada’s manufacturing sector has already been hit hard by job losses from existing duties. Data from Statistics Canada shows the manufacturing industry lost 14,600 jobs year-over-year in July, or a 0.8 per cent decrease.
What about inflation? Economists said the impact on inflation will depend on how Canada responds to the tariffs.
Prime Minister Mark Carney told reporters at an unrelated news conference in Newfoundland on Monday that he has “plans for any situation that may arise” if the two sides fail to reach a deal, but didn’t expand on what that might mean.
Nathan Janzen, assistant chief economist at RBC Economics, said U.S. tariffs raises prices for U.S. importers, so U.S. consumers will be affected by inflationary measures as importers pass costs to consumers.
“The reality is, when you have a trade disruption like that, you will see retaliatory measures imposed by the other country. That’s where you could potentially see some impact — if Canada were to impose retaliatory measures on some of our own imports from the U.S.,” he said in an interview last week.
Andrew Grantham, executive director and chief economist for CIBC Capital Markets, said there may be a near-term increase in consumer prices if the Liberal government decides to impose retaliatory tariffs, which would put pressure on the inflation rate.
“U.S. tariffs will be a negative for the Canadian economy. Longer term, that actually has a disinflationary pressure for the Canadian economy…. But nothing is guaranteed because we don’t know if these tariffs will come into effect, and if they do, if and how we are going to retaliate,” he said in an interview last week.
How are businesses and consumers reacting? A report by economists and researchers at the Canadian Federation of Independent Businesses found that around 90 per cent of 1,833 members surveyed said they are concerned about the potential impact of the proposed tariffs.
Around 78 per cent of respondents believed that the new tariffs would make their products uncompetitive in the U.S. market, and 75 per cent said it would accelerate efforts to reduce dependence on the U.S. market.
Seventy-eight per cent of respondents also said they expect revenue losses if the tariffs are implemented, with 35 per cent of those respondents predicting revenues falling by at least half.
On the consumer side, a new survey conducted by Abacus Data found that 70 per cent of 1,499 respondents expect the tariffs to harm their local economies.
Seventy-four per cent of those surveyed said the trade dispute with the U.S. has affected their household finances, with 30 per cent of those respondents describing the impact as major and 44 per cent describing it as minor.
However, Canadians were divided on whether Ottawa should respond. Thirty-six per cent of respondents said they want Canada to respond with new counter tariffs, while another 30 per cent preferred continued negotiations without new counter tariffs. Only 18 per cent favoured offering concessions to U.S. officials, such as ending provincial bans on American alcohol, if doing so gets tariffs removed.
Additionally, 55 per cent said Canada should prepare to move on from CUSMA and build trade relationships with other countries, while 34 per cent said they want Canada to keep working to preserve the agreement.
So what happens now? The tariffs will take affect at 12:01 a.m. on Wednesday if Canadian and U.S. officials do not reach a deal before the deadline.
Canada-U.S. Trade Minister Dominic LeBlanc, chief trade negotiator Janice Charette and U.S. Trade Representative Jamieson Greer have been in Washington, D.C., but no deal has been reached as of Tuesday morning.
Carney told reporters on Monday that officials are holding last-minute talks to prevent the tariffs from taking effect, and that he will be meeting with Trump ahead of the deadline.
“I have a plan will cover all eventualities … We are negotiating. Negotiations are very intense and delicate. This is not the time to talk about negotiations in public,” he said in French.
“We are negotiating from a position of strength.”
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