Trump’s 25% tariff presents equal pain on both sides of the border

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Business and political leaders in Canada say there will be pain if Donald Trump follows through on his promise to impose a 25 percent tariff on all Canadian goods, but they recognize the damage will also occur in his country.

The president-elect wrote to Truth Social on Monday that he will sign an executive order imposing a 25 percent tariff on all products entering the United States from Canada and Mexico.

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He said the prices will remain in place until both countries stop drugs, especially fentanyl, and people from crossing the borders illegally.

The CEO of the Canadian American Business Council, Beth Burke, said in a statement Monday night that Trump’s proposal would hurt businesses on both sides of the border and would “destroy the economic and national strength of North America.”

The Canadian dollar traded at 71.02 US cents early Tuesday morning, down from 71.53 US cents on Monday.

Ontario Premier Doug Ford posted on social media that a 25 percent tax would hurt workers and jobs in Canada and the US.

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Quebec Premier Francois Legault tweeted that everything must be done to avoid the tariffs, while British Columbia Premier David Eby wrote that Trump’s tariffs “will hurt Canadians and Americans alike.”

“Canadians must be united. Ottawa must respond with force,” Eby said on Twitter.

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Alberta Premier Danielle Smith said in a social media post that the Trump administration has “legitimate concerns related to illegal activities” at the border. But he noted that most of his province’s exports to the US “are delivered through safe and secure pipelines” which he said “do not contribute to these illegal activities.”

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Modeling by the Canadian Chamber of Commerce suggests that a 10 percent tax across the board would reduce the size of the Canadian economy by between 0.9 and 1 percent, resulting in nearly $30 billion a year in economic costs.

It estimates that the US will see about $125 billion a year in economic costs.

“For American businesses and American consumers, this could mean higher prices and higher input costs and a more competitive business environment in America,” said the chamber’s top economist, Stephen Tapp, in an interview late Monday.

Things would be worse if other countries retaliated with their walls. If so, Canadian income would drop by 1.5 percent and productivity by 1.6 percent, the chamber’s report said.

Tapp said this would equate to USD $2,000 less purchasing power for the American consumer. The numbers are even higher with a 25 percent tariff.

He suspects that the increased costs will not be appreciated in the US who voted for Trump’s promises to reduce inflation and the cost of living.

“Consumers who just went through the pandemic and the big inflation, and it’s been tough times for Americans and Canadians, I think they’re not going to be really happy to see the prices go up and the sticker shock they’re going to feel after the prices go in.”

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A joint statement from Deputy Premier Chrystia Freeland and Public Safety Minister Dominic LeBlanc said Ottawa will continue to discuss border security issues with the incoming administration.

Even the threat of tariffs is bad for investment in Canadian business, Tapp said.

“It would be bad for the overall sentiment in Canada on the consumer side,” he said.

Trump’s first administration in the White House has shown that Canadian businesses are resilient, Tapp said. They must prepare a large number of orders before tariffs go into effect while bracing for uncertainty and chaos over the next four years.

“We realized that we have to take Trump seriously.”

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