Canadian manufacturers fear ‘devastating’ impact from Trump’s proposed 25% tariff

TORONTO (ICIS)–New US tariffs on US-Canada trade would have a devastating impact on manufacturers, workers and consumers on both sides of the border, trade group Canadian Manufacturers and Exporters (CME) said on Tuesday.

“This is truly a lose-lose proposition,” the group said in reacting to news on Monday that President-elect Donald Trump plans to impose a 25% tariff on all imports from Canada and Mexico.

“On January 20th, as one of my many first executive orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States, and its ridiculous open borders,” Trump said on social media.

The tariffs would remain in place until Canada and Mexico took action on drugs and immigrants entering the US, Trump said.

Notably, he did not mention an exemption for US-Canadian energy trade. Trump previously proposed to raise tariffs by 10-20% on all imports, and by 60% on imports from China.

CME said that Canada’s exports to the US were primarily materials and inputs used by US businesses to manufacture other products.

As such, imposing tariffs would not just harm Canada’s economy – it would also hurt US manufacturers by increasing their costs and disrupting the deeply integrated supply chains that made North American manufacturing globally competitive, the group said.

The economic relationship between Canada and the US is “enormous”, with Canadian dollar (C$) 2.5 billion (US$1.8 billion) in goods crossing the border every day in 2023, it said.

Of that trade, 75% consists of manufactured goods, the group said.

Trump claims that he wants US manufacturing to grow and thrive, but “these tariffs would have the opposite effect,” CME said.

The group added that it was working closely with the federal government in Canada and partners at the US National Association of Manufacturers (NAM) to ensure the new Trump administration and other decision-makers “fully understand the consequences of this proposal”.

“We believe Canada and the US must work together on policies that support the growth of manufacturing while strengthening our shared economic and national security and not pursuing policies that will undoubtedly harm US manufacturers, in addition to Canadian businesses and workers,” it added.

CME represents all of Canada’s manufacturers. Among many others, its members include NOVA Chemicals and other chemical producers.

The Chemistry Industry Association of Canada (CIAC), which speaks for Canada’s chemicals and plastics industries, said that companies on both sides of the border were still digesting the news of Trump’s tariffs, as was CIAC. The group expects to be able to provide comment soon.

According to previous CIAC data, about 80% of Canada’s chemicals production goes into export, with about 80% of those exports going to the US.

CANADIAN POLITICIANS REACT
Canadian government officials said that Prime Minister Justin Trudeau spoke with Trump shortly after Trump announced the tariffs. The details of the conversation were not disclosed.

Trudeau also spoke with the premiers (governors) of Canada’s Ontario and Quebec provinces, who warned of the risks the US tariffs pose to their respective economies. The premier of Ontario urged Trudeau to call a meeting with all premiers.

The premier of oil-rich Alberta province, Danielle Smith, said on social media that the incoming Trump administration had “valid concerns related to illegal activities at our shared border”.

Canada’s federal government needed to work with the US “to resolve these issues immediately, thereby avoiding any unnecessary tariffs on Canadian exports to the US”, she said.

“As the largest exporter of oil and gas to the US, we look forward to working with the new administration to strengthen energy security for both the US and Canada,” she added.

Last week, Canada’s finance minister and deputy prime minister Chrystia Freeland said that unlike Mexico, Canada was “more aligned today than ever” with the US with regard to concerns about China’s trade practices.

Canada had followed the US tariffs on electric vehicles (EVs), steel and aluminum from China, meaning it was not a back door for Chinese goods into the US, she said.

Meanwhile, some Canadian politicians have called for a US-Canada trade deal that would exclude Mexico. The current US-Mexico-Canada (USMCA) trade deal will be renegotiated in 2026.

Last week, experts at Oxford Economics said that new US tariffs, and Canada’s retaliatory tariffs, would raise inflation. Oxford, in its models, assumes that US-Canada energy trade will be exempted from the tariffs.

(U$1 = C$1.41)

Thumbnail of photo Trudeau (left) meeting Trump in Washington in 2019 during Trump’s first presidency; photo source: Government of Canada