Canadian GDP could drop by 2.6%, with every citizen paying the price, if the proposed 25% across-the-board tariff is enforced
Both the Canadian and US economies could suffer “alarming” consequences if president-elect Donald Trump follows through on threats to impose a 25% tariff on all Canadian goods entering the country, according to a new Canadian Chamber of Commerce report.
The Business Data Lab (BDL) analysis shows serious potential economic risks if retaliatory tariffs are implemented. Gross domestic product in Canada could contract by 2.6%, CAD $78 billion, while an estimated cost of around $1,900 would be borne by every Canadian on average. The United States would also suffer a similar fate, as its gross domestic product would decline by 1.6% or about USD $467 billion, at an average cost of $1,300 per American.
The Chamber of Commerce’s chief economist Stephen Tapp said the tariffs could plunge Canada’s economy into recession by the middle of next year. “But these results also underscore Canada’s economic importance to the US,” he added, “something that’s often underappreciated south of the border.
“Make no mistake, if Trump imposed these tariffs, it would represent a significant negative shock to the US economy. It would raise costs for businesses, make American production less competitive internationally, and raise prices even more for consumers who’ve recently suffered through the pandemic and the highest inflation in generations.”
The report highlighted Canada and the US’s integrated trade system, with three-quarters of bilateral trade involving business inputs rather than finished goods. The report said new tariffs would heavily impact key industries: energy, automotive, mining, and pharmaceutical sectors, which would take the worst hit.
The Chamber of Commerce emphasized the importance of planning to protect Canada’s economic interest and avoid worst-case scenarios, with the digital services tax north of the border also identified as a potential complicating factor for the economy in 2025.
