Tariff Watch

Research evidence excerpt

Tariff Watch

Carney has also indicated that should the threatened tariffs come into

effect that Canada "will do whatever it takes" and emphasized that all

options are on the table.

Some of Canada's premiers have taken hard-line stances.

• Ontario Premier Ford advocated for dollar-for-dollar retaliation should

the new US tariffs come into effect.

• BC Premier Eby has indicated there is no chance US alcohol products will

be allowed to be stocked again.

Notably, the premiers are meeting this week potentially providing a greater

opportunity for a coordinated response. While PM Carney is not at the

meeting, he will be discussing the negotiation with the premiers virtually.

What are the potential economic impacts from the tariffs?

In coming weeks, there may be a pickup of export activity from Canada to

the US in an attempt to front-run the threatened tariffs. This may provide

a boost to growth for July and August, with this effect potentially unwinding

in September/October.

While trade policy uncertainty has remained elevated, recent surveys have

suggested that Canadian businesses are proceeding with investment plans

in spite of this.

• For example, the BoC recently highlighted that "Although the Canada-

US-Mexico Agreement is now subject to annual reviews, more

businesses report they are finding ways to navigate through the

uncertainty."

Notably, trade dependence between the two economies has lessened in

recent years.

• The share of US goods imports coming from Canada has declined to the

lowest level since at least 2000.

• Similarly, the share of Canada's goods exports going to the US has fallen

to ~68%, the lowest share since at least 1990.

• Data from the BEA suggest the US trade deficit with Canada has

lessened considerably since Trump took office for his second term.