I stepped off a plane in Ottawa last week to a very different economic conversation than I’d left when reporting from Washington. The specter of Trump-era tariffs hangs over the Canadian economy like storm clouds gathering over Parliament Hill.
“My supplier in Michigan is already asking me to sign contingency agreements,” says Marcel Dubois, who runs a mid-sized auto parts distribution company in Windsor. “They’re preparing for 25% tariffs on day one of a second Trump administration. I can’t absorb that—it goes straight to consumers.”
Dubois isn’t alone. Across industries, Canadian businesses are bracing for economic whiplash if Trump’s promised tariffs on all Canadian imports materialize. The potential impact reaches far beyond boardrooms into kitchen tables across the country.
The numbers paint a concerning picture. According to a recent analysis by RBC Economics, Trump’s proposed 10-20% blanket tariffs could slash Canada’s GDP growth by up to 1.8 percentage points and potentially eliminate 200,000 jobs within the first year of implementation. Manufacturing provinces like Ontario and Quebec would bear the heaviest burden.
What makes the current threat particularly concerning is timing. Unlike 2018, when Trump first targeted steel and aluminum with tariffs, today’s Canadian household finances are already stretched thin. StatsCan data shows the average household savings rate has plummeted to 3.2%, compared to 8.4% pre-pandemic.
“Canadians have depleted their pandemic savings and are highly leveraged with debt,” explains Erica Carson, senior economist at the Conference Board of Canada. “They have little financial cushion to absorb price increases that would come with tariffs.”
Walking through Toronto’s St. Lawrence Market yesterday, I asked shoppers about potential price increases. Most were unaware of how directly tariffs could hit their wallets. When I explained that everything from avocados to automobiles could see significant price hikes, the response was universal concern.
“We’re already choosing between heating and eating some months,” said Natalie Kim, a teacher and mother of two. “If groceries go up another 10 percent, I honestly don’t know what we’ll cut.”
The Bank of Canada faces a difficult balancing act. While it has been gradually lowering interest rates to ease pressure on indebted Canadians, tariff-induced inflation could force a policy recalibration. Deputy Governor Sharon Kozicki acknowledged in a speech last week that potential trade disruptions remain “a significant downside risk” to their economic outlook.
Export-dependent sectors stand to lose the most. The automotive industry, which sends approximately 85% of its Canadian-made vehicles south of the border, could face devastating disruptions. A study by DesRosiers Automotive Consultants estimates tariffs could increase vehicle prices by $5,000-8,000 for Canadian consumers while simultaneously threatening tens of thousands of manufacturing jobs.
“The integrated nature of North American auto manufacturing means everyone loses in a tariff war,” says industry analyst Joseph Brennan. “A part might cross the border seven times during production. Each crossing adds tariff costs.”
Energy exports present another vulnerability. Canada supplies approximately 60% of U.S. oil imports, according to Natural Resources Canada. While American refineries are configured for Canadian heavy crude, making substitution difficult, tariffs would still create market distortions and likely reduce Canadian producer revenues.
The Trudeau government has remained publicly optimistic while quietly preparing contingency plans. Sources within Global Affairs Canada tell me they’ve established a rapid response team specifically focused on tariff scenarios. They’re analyzing sectors most vulnerable to disruption and exploring alternative export markets.
Finance Minister Chrystia Freeland struck a defiant tone when I caught up with her at a downtown Ottawa event. “Canada successfully navigated trade tensions before, and we’ll do it again,” she stated. “We’re focusing on making our economy more resilient through diversification and innovation.”
But diversification takes time that struggling Canadian households may not have. The Canadian Chamber of Commerce estimates that consumer prices for tariff-affected goods could rise within weeks of implementation.
Some economists suggest the tariff threat might be more negotiating tactic than policy certainty. “Trump used tariffs as leverage in NAFTA renegotiations,” notes University of Toronto economist Patricia Mendoza. “The goal may be concessions rather than long-term trade barriers.”
Cold comfort for consumers already cutting expenses to manage Canada’s cost-of-living crisis. A recent Angus Reid survey found 65% of Canadians are already reducing discretionary spending, with 41% delaying major purchases due to financial constraints.
For businesses caught in the crossfire, contingency planning has become urgent. Manufacturers are examining supply chains, seeking domestic alternatives where possible, and building pricing models that incorporate potential tariffs.
“We’re looking at reshoring component production,” explains Jennifer Tran, operations director at a Montreal electronics manufacturer. “It increases costs by about 15%, but might be less than tariffs. Either way, consumers ultimately pay more.”
As I file this story from a coffee shop in downtown Ottawa, the couple at the next table is discussing whether to delay their home renovation due to uncertainty about material costs. Their conversation echoes across the country—ordinary Canadians, already financially stretched, now facing another economic threat beyond their control.
The economic interconnection between Canada and the United States runs too deep for easy solutions. As one Windsor auto worker told me, “The border may be a line on a map, but our economies are really just one big machine.” Now Canadians wait anxiously to see if that machine will continue running smoothly, or if tariff wrenches will bring parts of it grinding to a halt.
