Canada’s manufacturers and exporters say Canada must act decisively to protect the manufacturing sector 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 (CME) president and CEO Dennis Darby said 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.
The letter says retaliatory measures must be strategic, targeted and enacted in consultation with industry to minimize collateral damage.
Darby says a recent CME survey found that 90 percent of manufacturers expect significant or severe impacts if tariffs are imposed.
The survey also says 48 percent of manufacturers anticipate layoffs or hiring freezes if tariffs proceed and that 49 percent of those surveyed say they plan to shift some production to the U.S.
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Economists say tariffs on shipments to the U.S. would raise prices for consumers there, but would also take a cut out of Canadian businesses that rely on those exports.
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 called 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.
He also called for 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.
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 as well as improve interprovincial trade.
