The trade war that US President Donald Trump has triggered with Canada is expected to hurt businesses in both countries. But experts say the damage to the Canadian economy will be worse, as the tit-for-tat tariffs have raised the chances of a recession.
On Saturday, the US imposed 50 percent tariffs on $20bn worth of Canadian goods after trade negotiations between the two countries collapsed. On Monday, Trump also threatened Canada with new 50 percent levies on all car products, starting January 1. On Tuesday, Prime Minister Mark Carney unveiled retaliatory measures against more than 700 US products, also valued at $20bn.
While Canada's efforts have sparked a surge of nationalism, experts warn the feeling might sour in the face of economic losses. Canada's economy is a tenth the size of its US counterpart, and the country sends about 70 percent of its exports south of the border, making it especially vulnerable to US trade penalties.
According to Oxford Economics, the US tariffs will shave 0.3 percentage points off Canada's GDP next year, but specific provinces and sectors will be hit harder. Manufacturers in Quebec, New Brunswick, and Ontario will be affected the most, as will exporters in British Columbia.
"This absolutely is a trade war," said Ashley Kalyn, an international trade consultant at Peacock Tariff Consulting in Toronto. "We are feeling the effects in Canada and expect upwards of 100,000 jobs to be lost." She told Al Jazeera that some clients are already planning to shut down factories and lay off workers if the tariffs remain.
Tensions escalated this week after Trump announced that the US federal government will now refer to Lake Ontario as Lake America, in protest against Canada. Prime Minister Carney pointed out that the name "Ontario" is Indigenous and more than 400 years old. Manitoba Premier Wab Kinew dismissed the renaming as a feeble effort.
Economists fear that further unraveling could end the USMCA free trade agreement. That scenario would "push Canada's economy into a recession and leave it on a permanently lower path," warned Tony Stillo from Oxford Economics.
Another concern is the car-making industry. Trump has threatened to double automobile tariffs to 50 percent starting in 2027, which would harm carmakers on both sides of the border, especially in Midwestern states like Michigan, Ohio, and Indiana.
Within Canada, political divides are widening. Ontario Premier Doug Ford advocates a strong-armed approach, while Alberta and Saskatchewan resist export taxes on natural resources. Experts say the key date is September 8, when Canada's reciprocal tariffs take effect.
Source: www.aljazeera.com