You might have whiplash if you’ve been following the trade war this week.
After weeks of threats, U.S. President Donald Trump said Saturday he was officially slapping a 25 per cent tariff on virtually all Canadian goods and a 10 per cent tariff on Canadian energy.
In retaliation, Canada said it would start by applying a 25 per cent tariff on $30 billion worth of American goods coming into the country — followed by another $125 billion worth of U.S. imports in three weeks’ time.
Reactions in Canada have been swift. People are boycotting U.S. products. “Buy Canadian” groups are proliferating on social media, some with hundreds of thousands of new followers. Several provinces said they were pulling U.S. booze from liquor store shelves.
And then, on Monday afternoon, after a couple of conversations with Prime Minister Justin Trudeau, Trump agreed to a 30-day pause. But as analysts have pointed out, that doesn’t mean the trade war is over.
The threats of tariffs and counter-tariffs have highlighted some important economic vulnerabilities, said Fen Osler Hampson, a professor of international affairs and co-chair of the Expert Group on Canada-U.S. Relations at Carleton University in Ottawa.
“If you get into a full-blown tariff war, you’re going to generally make everything more expensive,” Hampson said. “Everybody’s going to take a hit.”
And while “buy Canadian” measures are great in theory, the knock-on effects of tariffs and counter-tariffs will drive up demand and prices of Canadian-made products, too, Hampson said.
“We face the same problem as Americans, which is that we don’t produce everything we consume.”
Canada is the largest export destination for U.S. goods, Scotiabank explained in a Jan. 31 report on Canada-U.S. trade. In 2023, Canada exported $593 billion Cdn worth of goods to the United States and imported $484 billion worth of U.S. products, the financial institution said.
Tariff threats by U.S. President Donald Trump haven’t just inspired many Canadians to cease buying products from our southern neighbour, they’ve also shed light on just how tangled our two economies are, and how complex the answer can be when trying to figure out where a product is made.
At the end of November, the Canadian Chamber of Commerce estimated Trump’s 25 per cent tariff would cost Canadians about $1,900 per person annually. Energy, autos, mining, pharmaceuticals, chemical and forestry products would be the most heavily impacted sectors, Stephen Tapp, the chamber’s chief economist, wrote in the report.
The independent think-tank Public Policy Forum estimates that retaliatory tariffs could cause consumer prices to rise by 4.1 per cent.
Retail sector, grocery items particularly vulnerable
The Canadian energy sector, which was facing a 10 per cent tariff, will be slightly less vulnerable simply because the U.S. needs what we produce, Hampson said. For example, Canada is the country’s No. 1 source of oil imports.
But the scale of the proposed U.S. tariffs and Canadian counter-tariffs will cause damage to the retail sectors on both sides of the border, the Retail Council of Canada said in a statement on Monday.
Specifically in terms of counter-tariffs, Canadians are likely to be most affected by grocery items, due to thin margins and few Canadian alternatives for some products, Matt Poirier, vice-president of federal government relations at the Retail Council of Canada, told CBC News.
While the Canadian counter-tariffs singled out U.S. meat, poultry, dairy, cheese and eggs, most of those items on grocery shelves here are already Canadian, Poirier said. But the same can’t be said for other products, such as limes and oranges.
“I think the big one right now is produce,” he said. “This time of year, in the middle of winter, we’re importing most of our produce from the southern United States.”
Fresh fruit and vegetables were the second-most exported food item from the U.S. to Canada in 2023, according to the U.S. Department of Agriculture. As the Fruit and Vegetable Growers of Canada pointed out in a statement on Monday, Canada’s fruit and vegetable sector is deeply intertwined with the U.S. market, exporting $4.4 billion annually.
Juice, cereal likely to cost more
Tomatoes, cucumbers, citrus fruits like oranges and grapefruits, melons, berries and stone fruits like peaches and cherries were singled out in Canada’s proposed counter-tariffs. And given that these perishable items can’t be stockpiled in advance, consumers could expect to see prices jump on those immediately after any tariffs come into effect, according to the RSM Real Economy Blog.
Ottawa’s counter-tariffs also went after orange juice from Florida, home to Trump’s Mar-a-Lago estate in Palm Beach. Canada imported $596 million in fruit juice in 2022, primarily from the U.S., according to the Observatory of Economic Complexity.
“Canada is one of the most important markets for U.S. citrus (and specifically Florida citrus),” notes the Florida Department of Citrus.
There are very few Canadian options, so if tariffs come into play, consumers can likely expect to see price increases on their already expensive OJ.
Grains will take a hit from tariffs and counter-tariffs, too, Carleton University’s Hampson said, affecting everything from breakfast cereal to pancake mix.
Baked goods, cereal and pasta were the top consumer-oriented food exports from the U.S. to Canada from 2019 to 2023, with nearly $2.8 billion US in sales in 2023, according to the U.S. Department of Agriculture. The Canadian government’s list of counter-tariffs specifically mentions grain products, including wheat, rye, barley, oats and rice, as well as pasta.
What about alcohol?
Beer, wine and liquor have certainly received a lot of attention in the tariff war.
Before Trump and Trudeau agreed to the 30-day pause, Canada’s counter-tariffs also went after booze, including wine, beer, cider, whisky, rum, gin, vodka, brandies and tequila. In addition, several Canadian provinces ordered American-made liquor off the shelves.
According to the U.S. Census Bureau, 35 per cent of the country’s wine exports came to Canada last year, as did 11.2 per cent of its beer exports and 10.6 per cent of its hard liquor exports.
Key brands like Don Julio tequila and Jack Daniel’s whisky from producers like Diageo and Brown-Forman would become more expensive for U.S. and Canadian drinkers if importers hike prices to cover the cost of future tariffs, Reuters reports. Some analysts estimated brands like Diageo’s Crown Royal Canadian whisky would rise in price by as much as 10 per cent in the U.S., threatening to hurt sales.
And until Canadian producers ramp up production, Canadian booze sold here would get more expensive as people look for replacements for California wines and Kentucky bourbon, Hampson said.
“Yes, by all means, buy Canadian. But until they can really ramp up production to meet demand … they’re going to raise the price.”
‘We’re not making enough of it ourselves’
Canada’s proposed counter-tariffs also specifically mentioned cosmetics, including perfumes and makeup; toiletries, including shampoo, toothpaste, deodorant and soap; and various clothing items, including coats, jackets, suits, shirts, skirts, pants, shorts, dresses, underwear, bras, pyjamas, babywear, sports clothing, socks, scarves, gloves and belts.
The approximate annual dollar value of imported cosmetics and body-care items is $3.5 billion, reports The Canadian Press. And the U.S. is Canada’s largest supplier of beauty products, according to the Observatory of Economic Complexity.
The U.S. is Canada’s second-largest supplier of textiles and clothing imports, after China, according to World Bank data.
Any tariffs or counter-tariffs will affect these items, Hampson said. If the price of energy goes up, it costs more to run the factories and more to ship the items — key factors of production that get more expensive.
And again, if more people seek Canadian alternatives, the increased demand boosts the prices of Canadian-produced goods — unless suppliers can very quickly increase their production, he said.
“People tend to forget that. There’s a knock-on effect. Shifting demand to Canadian producers — there’s a reason why we buy American or buy Chinese. It’s because we’re not making enough of it ourselves.”
From booing the U.S. national anthem to skipping American items at the grocery store, a simmering trade war has some Canadians feeling more patriotic and less polite with their southern neighbours.