A report estimates Trump's 10% tariff plan would hit Canadian exports and jobs, with ripple effects
A recent report by University of Calgary economics professor Trevor Tombe warns that Donald Trump’s election policy proposal to apply a 10 percent tariff on all US imports could have significant economic consequences.
According to Financial Post, both Canada and the US would be affected.
The report, Partners in Prosperity: Exploring the Significance of Canada-US Trade, notes that this tariff, along with retaliatory measures from Canada and other countries, would significantly impact productivity, prices, and incomes.
Tombe’s report estimates that real incomes in Canada would decline by 1.5 percent, with labour productivity falling by 1.6 percent.
In the US, both real income and labour productivity would drop by around 1 percent. The policy would also result in a loss of real annual income of $1,100 (US$800) for individuals on both sides of the border.
The last time the US imposed a similar 10 percent tariff across all imports was in 1971, under President Richard Nixon. Although that tariff lasted only four months, it had a significant effect on US trade policy.
Tombe notes that a more permanent tariff, such as the one proposed by Trump, would likely cause even greater disruptions in trade flows between the two countries.
The report highlights that US companies may need to seek less productive domestic suppliers, affecting overall productivity. Canadian exports, particularly in energy and manufactured car parts, could see a decline of up to 22 percent.
While the report does not specify job losses, Tombe refers to estimates from the Nixon tariff period, which suggested that Canada could have lost 90,000 jobs if that tariff had lasted for a full year.
Canada’s close trade relationship with the US is particularly crucial for certain states and provinces. For instance, trade with Canada accounts for 16 percent of Montana’s economy, 14 percent in Michigan, and 10 percent in Illinois.
In contrast, in provinces like New Brunswick, trade with the US constitutes 62 percent of the economy, with Alberta, Manitoba, and Ontario also highly dependent on US trade.
The report also emphasizes the importance of value-added trade between the two countries. Canadian inputs contribute around US$20bn annually to US exports, with the figure exceeding US$24bn in 2019.
Similarly, 12 percent of US imports from Canada consist of value-added trade originating in the US.
Tombe concludes by highlighting the mutual benefits of this integrated supply chain.
“The sustained economic benefits of this relationship are clear: both countries gain from an integrated supply chain that leverages their respective strengths,” he said.
Protecting this trade relationship could enhance economic stability, productivity, and global competitiveness for both Canada and the US in the future.
