US tariffs jeopardize N America’s competitive advantage, Canadian chemical group warns

TORONTO (ICIS)–The US tariffs on goods imported from Canada and Mexico threaten the competitive edge that North America has in the global market, trade group Chemistry Industry Association of Canada (CIAC) said on Tuesday.

CIAC was commenting on the blanket 25% tariff on non-energy goods imported from Canada and Mexico that kicked in on 4 March. The tariff on Canadian energy is 10%.

“The impact of these tariffs is not limited to the shop floor or the boardroom,” said Greg Moffatt, president and CEO of Ottawa-based CIAC.

“Costs will rise, and consumers and businesses alike will shoulder the weight of these tariffs at a time when cost-of-living is already high in both countries,” Moffatt said.

The tariffs would threaten “the competitive edge that North America has enjoyed in the global market, hindering our ability to innovate and deliver solutions for the long-term viability of both the American and Canadian economies,” he added.

The tariffs pose “immediate challenges to the economies of both Canada and the US, which have long benefited from the seamless trade relationship between our two nations,” CIAC said.

Tariffs were taxes on industries and consumers buying business inputs and consumer goods, CIAC said.

Furthermore, Canada’s retaliatory tariffs would have “a magnifying effect,” it added.

Canada is the US’ largest customer for manufactured goods, CIAC said.

Canada’s chemistry and plastics sectors provide key inputs that support a thriving and growing US manufacturing sector, it said.

The tariffs affect about Canadian dollar (C$) 115 billion (US$80 billion) in cross-border chemicals and plastics trade, according to CIAC data. In chemicals, the US had a surplus in 2023, according to the following CIAC chart:

CANADIAN RESPONSE
Canada’s government is due to update on its response to the US tariffs later on Tuesday.

Last week, outgoing Prime Minister Justin Trudeau said Canada would, as previously announced, impose retaliatory tariffs on C$155 billion of goods imported from the US.

Canada would initially impose tariffs on C$30 billion of US goods, starting 4 March, to be followed 21 days later by tariffs on another C$125 billion of US goods, Trudeau said.

An initial list of products subject to Canadian tariffs, published earlier this month, includes beverages, cosmetics, paper products and some finished plastics products, among many others.

Some economists have warned about Canada imposing retaliatory tariffs, saying these would worsen the harm to the economy and consumers.

Canada’s central bank, the Bank of Canada, said last month that with retaliatory tariffs businesses would face higher import costs.

Canadian businesses buy roughly half of their machinery and equipment from the US, the bank said.

Retaliatory tariffs on US exports to Canada would also feed into the consumer price index (CPI), the bank said. About 13% of Canada’s CPI basket is made up of goods imported from the US.

The integrated US-Canada supply chains mean tariffs can add costs at multiple stages of production, the bank added.

NEW PRIME MINISTER
The US tariffs come as Canada is set to get a new prime minister.

Trudeau, who announced his resignation on 6 January, is due to step down as prime minister on 9 March, when his Liberal party will announce a successor.

The front runner to succeed Trudeau is Mark Carney, a former governor of two central banks: The Bank of Canada, from 2008 to 2013, and the Bank of England, from 2013 to 2020.

Last week’s Liberal leadership debates between Carney, former finance minister Chrystia Freeland and two other contenders were dominated by the issue of who would be best suited to face the challenges posed by Trump.

Meanwhile, the Liberals have caught up with the opposition Conservatives in opinion polls about the next federal election, which must be held by October, but will likely be called earlier.

(US$1 = C$1.44)

Please visit US tariffs, policy – impact on chemicals and energy

Thumbnail photo source: Government of Canada