Economist warns Trump’s proposed tariffs could halt Canada’s growth and pressure the Canadian dollar
Donald Trump’s recent tariff proposal on imports from Canada, Mexico, and China has raised concerns among Canadian economists and policymakers.
Trump stated on his Truth Social platform that he plans to impose a 25 percent tariff on all Canadian and Mexican products and an additional 10 percent tariff on goods from China.
According to Bloomberg News, this announcement is consistent with Trump’s negotiation tactics.
James Orlando, director and senior economist at TD Economics, warned that the proposed tariffs could halt economic growth in Canada.
Speaking to BNN Bloomberg, he explained, “If 25 percent tariffs come on Canada on (a) blanket scale, and we don’t have retaliation, then we’re effectively going to get just zero economic growth in Canada with higher inflation.”
He added that such a scenario would likely prompt the Bank of Canada to adjust its interest rate strategy to support the economy.
The Bank of Canada has already indicated to Reuters that it would incorporate the impact of tariffs into its economic forecasts.
Orlando also cautioned that retaliation by Canada could deepen the economic impact, potentially pushing growth into negative territory.
A TD Economics analysis before the US presidential election found that a 10 percent tariff across the board could lead to a 2.4 percentage point drop in Canada’s real GDP over two years, assuming retaliatory actions.
CTV News reported that Prime Minister Justin Trudeau and his government are expected to face questions about the proposed tariffs from the premiers during a meeting on Wednesday.
The tariff announcement affected currency markets, with the Canadian dollar reaching a four-year low of 71 cents US on Tuesday. Bloomberg News reported gains for the US dollar as a result.
Orlando noted that the Canadian economy’s underperformance compared to the US has already pressured the Bank of Canada to lower interest rates faster than the US Federal Reserve.
He warned that further trade tensions could push the Canadian dollar below 70 cents US, potentially dipping into the 60-cent range.
A 25 percent tariff could significantly impact Canada’s export-driven economy. “Canada exports around 77 percent of our exports to the United States. And energy is obviously the biggest one... in terms of volume,” Orlando stated.
Other key industries, including autos, steel, and aluminum, face heightened exposure due to increased trade ties since the United States-Mexico-Canada Agreement (USMCA).
“These sectors that we’re talking about… are exposed to a greater extent than they were before,” he added.
Orlando characterized Trump’s tariff threats as part of his typical negotiation strategy. “You threaten tariffs as a means to potentially get other concessions,” he explained.
With USMCA set for renegotiation in 2026, Orlando suggested these proposed tariffs might signal a starting point for upcoming trade talks.
He anticipates sector-specific negotiations focusing on issues like the digital services tax or the dairy lobby.
While the proposed tariffs are not guaranteed, Orlando emphasized the risks they pose to Canada’s economic stability.
“I don’t think it’s necessarily set in stone that a blanket 25 percent tariff would be implemented,” he said, adding that the negotiations will reveal the US administration’s true focus.
