OTTAWA — Canadian industry groups are calling on the government to protect businesses if U.S. president-elect Donald Trump goes ahead with his threat to impose tariffs on Canadian goods headed to the U.S.
In an open letter to the leaders of the major federal political parties, Canadian Manufacturers and Exporters president and CEO Dennis Darby says the imminent threat of sweeping U.S. tariffs poses a significant and immediate risk to the manufacturing sector.
"If Canada retaliates, the economic fallout will be even worse, driving up costs for businesses and consumers on both sides of the border," Darby wrote.
He says a recent CME survey found that 90 per cent of manufacturers expect significant or severe impacts if tariffs are imposed.
This would happen in several ways, he explained in an interview. For one, much of what Canada sends to the U.S. are "semi-finished" goods, parts or ingredients, he said. Those would become more expensive for U.S. businesses to buy, and the finished product would therefore be more expensive when it crosses into Canada again.
"So it's inflationary to both Canada and the U.S.," he said.
Canadian businesses would also see lost sales over time as U.S. companies look elsewhere to avoid higher costs, said Darby.
The survey said 48 per cent of manufacturers anticipate layoffs or hiring freezes if tariffs proceed and that 49 per cent of those surveyed said they planned to shift some production to the U.S.
With the Canadian economy already weakened by higher interest rates, "The downside to the economy could be greatly exacerbated should Trump move forward with broad tariffs," wrote TD economist Marc Ercolao in a Jan. 10 report.
Darby is calling on the government to mitigate the economic shock of tariffs by implementing a short-term tariff relief program to offset the immediate impact on exporters, which he said could be funded by revenues from counter-tariffs or export taxes.
Many businesses are already pausing plans to invest in their operations or expand, said Darby.
"We're already seeing ... a bit of a chill on investment and expansion and a chill on hiring," he said, adding that there are concerns companies could even move production to the U.S.
Darby is also calling for the government to offer incentives and funding to support domestic investment in manufacturing, tax relief measures and other supports to stabilize businesses and protect jobs.
"If legislation is required to implement any short-term measures, then we believe that it is in the interest of Canadians that Parliament is recalled without delay," Darby added.
"Prorogation must not obstruct urgent policies essential to safeguarding Canadian businesses, workers, and families at this critical time."
Parliament is currently prorogued until March 24 after Prime Minister Justin Trudeau announced he's stepping aside as Liberal Party leader, making way for a new one to be elected. The announcement and the prorogation have cast an extra shadow of uncertainty as the country gears up for Trump's inauguration and the fallout of potential tariffs.
If Canada retaliates, Darby said the government needs to have plans in place to supplement the impact on Canadian firms, something he said it has done before. In the letter, he says the retaliatory measures must be strategic, targeted and enacted in consultation with industry to minimize collateral damage.
U.S. tariffs, and retaliation from Canada, would lead to higher prices on retailers' shelves, said Retail Council of Canada vice-president of government relations Matt Poirier.
Retailers would also be affected by slower consumer spending as the economy takes a hit, he said.
"To the degree that these tariffs slow the economy, jam up supply chains and whatnot, that basically takes money out of the pockets of people, and then that directly impacts retail sales."
Consumers are extra sensitive to price increases at retailers and grocery stores after suffering a bout of inflation, said Poirier.
"It depends which retail goods are targeted, but unfortunately, it's disproportionately retail goods that are targeted to make the most political impact," he said.
"The unfortunate thing is that it's bad for American workers. It's bad for Canadians who are going to see higher prices. Nobody wins."
The Canadian Federation of Independent Business also called for government support, saying more than half of small businesses in the country are directly involved in either exporting to or importing from the U.S.
"Overall, businesses expect to face limited inventory or product availability and a need to find alternative markets or suppliers if tariffs are imposed," the organization said in a press release.
Tariffs would make the cost of doing business higher for many small business owners, the CFIB said, and those costs would be passed on to consumers.
The CFIB said in order to address the impact of potential tariffs, Canadian governments must reduce the tax burden on businesses.
Business groups said in addition to short-term relief, addressing longstanding issues like interprovincial trade barriers would also go a long way in the face of economic uncertainty.
"If it takes a crisis to drive these points home now, we'll take it," Poirier said.
This report by The Canadian Press was first published Jan. 15, 2025.
Rosa Saba, The Canadian Press
