The 50 percent tariffs that President Trump imposed on Canada this weekend could be devastating for many Canadian companies and their employees. It could price them out of the United States and lead to the loss in tens of thousands of jobs, economists say.
“Fifty percent is a huge number for the individual products that are affected,” said Joseph Steinberg, a professor of macroeconomics at the University of Toronto.
“For those products, we should see a very large reduction in exports,” he added. “In some cases, exports will stop altogether, and the firms that produce those products will be severely impacted. Some will undoubtedly shut down.”
Up to 90,000 jobs in Canada could be lost, according to calculations by Trevor Tombe, a trade economist at the University of Calgary in Alberta. Those include jobs at companies not directly affected by tariffs. For example, demand for truck drivers will dry up once Canadian firms are shut out of the U.S. market.
Among the industries likely to be hit hard is forestry. After decades of steep tariffs on softwood lumber — levies that Mr. Trump increased last year — it is facing additional 50 percent tariffs on exports that include plywood, laminated wood products, fiberboard, paper, tissue for toilet paper and packaging.
“We’re getting hammered,” said Derek Nighbor, president and of the Forest Products Association of Canada. Nevertheless, he said, he supports the decision of Prime Minister Mark Carney to walk away from trade negotiations with the United States on Friday night.
“This is at a time when the fundamentals of the U.S. economy are not great,” Mr. Nighbor added. “We’re dealing with very, very soft markets that aren’t going to get much better if this kind of tariff behavior keeps up.”
On Tuesday, Mr. Carney is expected to announce retaliation tariffs against the United States, Canadian officials said.
The collapse of trade talks led Mr. Trump to unleash the new tariffs on hundreds of exports from Canada. They cover about $20 billion in trade from Canada. The tariffs arrived on top of levies of 50 percent imposed on Canadian steel and aluminum, as well as 25 percent duties on automobiles that Mr. Trump announced last year.
On Monday, Mr. Trump also threatened to raise auto tariffs to 50 percent on Jan. 1 and to impose the same tariff on auto parts that are currently exempted from payments if they qualify as North American under the trade treaty between the United States, Mexico and Canada.
While $20 billion in trade sounds huge, it is about 5.5 percent of the value of all products Canada sends to the United States. So the new tariffs may not have a sweeping, debilitating effect on Canada’s economy, economists say.
Canada’s exports are dominated by shipments of oil and gas — items that Mr. Trump has excluded from his tariff war, along with the fertilizer potash and most minerals.
For the Canadian economy as a whole, the new levies will increase the effective tariff rate for Canadian products by about 2.5 percentage points, economists say. That will raise the average tariff that the United States puts on Canadian goods to about 6.5 percent, Professor Tombe said by email.
By comparison, Mr. Trump negotiated deals with several other major trading partners that brought in 15 percent in general tariffs.
The Royal Bank of Canada also estimated that tariffs at that average level would affect only about 0.4 percent of Canada’s economic output.
But in an analysis published on Monday, TD Securities, Toronto-Dominion Bank’s investment brokerage, said that the new tariffs were a potential problem even if they were unlikely to put sustained pressure on the Canadian dollar.
“The larger concern is the signal a failed agreement sends about the prospects for a broader trade resolution,” the analysis said. “Markets may interpret this as evidence that trade uncertainty will persist.”
While the tariffs that were imposed on Saturday will hurt the forest industries, they will most severely hit companies that export machinery and electronics, and that produce furniture, toys and products made largely of plastic.
The new tariffs will make it impossible for many Canadian companies to continue to sell to the U.S. market, Professor Steinberg said. About 15 percent of Canada’s economy is directly linked to trade with the United States, he estimated. The U.S. market takes about 70 percent of all Canadian exports.
But the importance of selling to Americans varies wildly among Canadian companies and economic sectors. Upward of 90 percent of vehicles made in Canada, for example, go to American buyers.
Mr. Carney, an economist and a former central banker, has pledged 28 billion Canadian dollars, about $20 billion, to help Canadian companies affected by the new U.S. levies, although details have yet to be released.
On Saturday, he suggested that Canada’s debt would not be caught up in a situation like the current instability in the U.S. bond market.
“We are entering a phase where fiscal strength, discipline, focus, is going to be very important; it’s going to be scrutinized,” he told reporters.
“The way the world works is that markets sometimes ignore these fundamentals. And then all of a sudden they focus on them. And when they focus them, if you don’t have your house in order, it is too late. We have our house in order.”
The prime minister also vowed, after the trade talks fell apart, to match the U.S. tariffs “dollar for dollar” on American goods coming into Canada.
Professor Steinberg said it was impossible to impose retaliatory tariffs that had no consequences, like higher prices, for Canadians.
“Canadian retaliatory tariffs on America, they do hurt America a little bit but also hurt the Canadian economy far more,” he said “Tariffs in either direction have roughly 10 times more impact on Canadian economy. That applies to Trump’s tariffs, that applies our retaliatory measures.”
More broadly, he said, tariffs aren’t obviously effective. The retaliatory levies Canada imposed on American-made autos and other products last year did not stop Mr. Trump from introducing his latest tariffs or overtly damage the overall U.S. economy.
“It’s just going to be a cost for the Canadian economy, but what do we gain from doing that?” Professor Steinberg said. “The case simply has not been made to me.”
On Monday, there were no obvious signs of panic in Canada. The S&P/TSX Index of Canadian stocks closed slightly up from last Friday. The Canadian dollar also closed down by less than 1 cent relative to the U.S. dollar.
