US tariffs could disrupt Canada’s GDP and key trade sectors, despite potential exemptions
Sweeping tariffs proposed by the US could reduce Canada’s GDP by as much as 3.25 percent, according to a CIBC report cited by CTV News.
The analysis, published Tuesday, explored four scenarios involving new US taxes on Canadian imports.
These scenarios included tariff rates ranging from 10 to 20 percent, with possible exemptions for key sectors such as oil and gas.
The potential move, announced by US President Donald Trump, involves imposing 25 percent tariffs on goods imported from Canada and Mexico starting February 1.
Prime Minister Justin Trudeau responded by stating that Canada would retaliate and that “everything is on the table.”
The CIBC report revealed that a 20 percent tariff excluding commodities—which represent nearly half of Canada’s exports to the US—would still result in a GDP loss of 3.25 percent.
Under a more moderate scenario, a 10 percent tariff excluding commodities and the auto sector would lead to a smaller impact of 1.35 percent.
The analysis suggested the Trump administration may choose to exempt certain industries. Taxing sectors heavily integrated with US counterparts, such as energy and automotive, could hurt US jobs, contradict its energy initiatives, and increase inflation.
According to the Canada-US Trade Relationship infographic by TD Economics, Canada’s economic ties with the US are deeply interconnected.
Canada remains the largest export market for US goods and services, purchasing $350bn annually. Meanwhile, the US imports $100bn worth of Canadian oil and gas each year.
The US also sources 50 to 80 percent of its critical minerals, such as zinc, nickel, tellurium, and vanadium, from Canada.
The infographic highlights that Canada’s tourism spending contributes $15bn to the US’s surplus in services trade.
Canada, however, maintains a $25bn trade deficit with the US—a figure significantly smaller than US deficits with other nations like China ($192bn) or Mexico ($130bn).
Canada is also a net importer of US auto products, totalling $5bn.
