US-Canada trade war – Higher prices and a drag on growth

With US President Trump’s persistent tariff threats, a US-Canada trade war now appears likely. Our new baseline forecast assumes the US imposes larger and swifter targeted tariffs that will begin to drag on the Canadian economy and push prices higher this year.

What you will learn:

• We expect the US will impose targeted 25% tariffs on Canadian metal, wood, food, and agricultural products in March, amounting to almost a quarter of Canadian goods exports to the US. We also assume proportional retaliatory tariffs by Canada.
• These products will likely be targeted by the US largely because of persistent trade deficits with Canada and, in some cases, higher relative Canadian tariffs – most notably due to Tariff Rate Quotas for Canada’s supply-managed animal and food products.
• The recently announced 25% tariffs on steel and aluminum, effective March 12, are already incorporated in our baseline. Our tariff assumptions are also well aligned with Trump’s latest plan to impose reciprocal tariffs, and we will update them once more details become available.

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