U.S. tariffs are expected to reduce growth in every single province, while retaliatory tariffs can inflict significant pain on the U.S. economy in a number of targeted industries, new analysis shows.
The research, released on March 7, was undertaken for the Public Policy Forum by Navius Research, a non-partisan consultancy specializing in quantitative analysis. It assesses how damaging the U.S. tariffs will be on both Canada and the United States and also examines potential Canada-led strategies to respond to U.S. tariffs.
“We undertook this study to provide quantitative guidance to policymakers in real-time,” said Inez Jabalpurwala, PPF President and CEO. “The work reveals emergent areas of focus for Canadian leaders, including the urgent development of east-west, and west-east trade in Canada and beyond.
The report shows that sectors in every province decline or experience price reductions, from “gasoline and diesel refined in New Brunswick, aluminum exported from Quebec, steel and automobiles from Ontario, potash and uranium from Saskatchewan or oil and gas from Alberta.”
Vehicle manufacturing would endure a hit of $93.8 billion in Ontario over a five-year period, while the aluminum industry in Quebec would lose $12.7 billion over the same time frame.
Some sectors where trade flows east-west rather than north-south (trading between provinces or with Asia and Europe) are insulated from U.S. tariffs and may actually experience growth during this period.
“Sectors with access to broader markets, such as offshore oil production in Newfoundland and LNG production on the west coast, may actually benefit from tariffs, which might be a guide for how Canada can insulate its economy in the future,” said Jotham Peters, managing partner at Navius Research,
In fact, the analysis notes: “Greater trade networks to either the east or west coast will help insulate Canada from trade shocks with the U.S. and can act as leverage for the next tariff threat.”
Looking at the effect of a 25 per cent retaliatory tariff on imports of 23 classes of U.S. goods into Canada identifies the retaliatory tariffs that can inflict more damage on the U.S. than on Canada.
The U.S. would suffer more harm over a five-year period than Canada due to retaliatory tariffs on: food, pharmaceuticals, fabricated metals, alcohol and tobacco, manufactured goods, steel, plastics, cement, non-ferrous metals, paper, mining products, clothes and wood products.
Conversely, Canada would do itself more harm than the U.S. by retaliating with tariffs on: oil, electric products, raw wood, natural gas, chemicals, refined petroleum, machinery, biofuels, agriculture and vehicles.
Taken together, the analysis shows that the pain of U.S. tariffs is a shared one, and that “we can’t afford to be split along regional lines. As well, it emphasizes the need for more east-west/west-east trade.
