So who are the real winners in an escalating trade row between Canada and the U.S.?
It’s going to be competitors outside North America, according to a new study from the C.D. Howe Institute.
“U.S. tariffs undermine the competitiveness of the NAFTA region, which works paradoxically to the benefit of most other regions,” says the June 12 report from authors Dan Ciuriak and Jingliang Xiao.
The pair examined how steel and aluminum tariffs, originally announced by the Americans in March, would impact the economies of various countries following the June 1 expiration of an exemption.
“The resulting damage to U.S. trade competitiveness drives competitive gains for China, Japan, the European Union, and [South] Korea in global trade, notwithstanding the reduction of some of their exports of the subject goods to the U.S. market,” the study said.
The authors found Canada’s GDP stands to lose US$8.1 billion in value terms compared with the U.S. at US$3 billion as a result of these measures.
Canada would eventually lose about 6,000 jobs.
But could the tariffs help other sectors in Canada’s economy?
Exports for steel and aluminum would decline in Canada as a result of the measures.
And with the market filling up with more product, domestic prices would fall and help companies using those products.
But the authors note that for Canada and Mexico, the competiveness effect would be outweighed by negative impacts on the targeted sectors.
“In the rest of the world, the latter effect dominates. China and Japan in particular make gains in real GDP (0.02 percent each), with the EU28 and Korea making slightly smaller gains (0.01 percent),” the report said.