Sweeping tariffs could be 3% hit to Canadian economy


An analysis published Tuesday examined four potential scenarios in which U.S. President Donald Trump slaps new taxes on goods imported from Canada, ranging from 10% to 20% and with possible carve-outs for key industries.

Speaking with reporters on Monday evening, Trump said he’s thinking about hitting Canada and Mexico with 25% tariffs on Feb. 1.

Get free MoneySense financial tips, news & advice in your inbox.

Canada’s response to threat of U.S. tariffs

Prime Minister Justin Trudeau has said Canada would respond and that “everything is on the table.”

The CIBC report said a 20% tariff that excludes commodities—which make up around 46% of Canadian exports to the U.S.—would still result in a GDP hit of 3.25%.

Under a more conservative scenario where only a 10% tariff is applied and excludes both commodities and the auto sector, the impact to the Canadian economy would be around 1.35%. That hypothetical would exempt roughly 60% of Canadian exports to the U.S.

The report suggested the Trump administration might not want to tax those sectors as they rely heavily on close integration with Canadian counterparts. It noted the oil and gas and auto sectors represent 28% and 14%, respectively, of total Canadian exports to the U.S.

“Doing so would come at a key cost to American jobs, contradict Trump’s cheap energy initiatives, and materially increase inflation,” it said.

“Realistically, we do not believe a permanent 25% sweeping tariff is a credible threat in the immediate future—implementation hurdles, negotiation, and the high risk of retaliation in this scenario makes it little feasible that a trade war will get that far—at least in our opinion anyways.”



Source link


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *