Donald Trump’s recent tariff threats are casting a shadow over Canada’s already fragile economy. The U.S. president’s announcement of 25% tariffs on steel and aluminum imports, set to take effect on March 12, could have far-reaching consequences for Canadian businesses and the broader economy.
Canada, the largest supplier of steel and aluminum to the U.S., exported $15.9 billion worth of steel in 2024. With approximately 90% of Canada’s steel and aluminum exports destined for the U.S., the impact of these tariffs could be significant.
While the steel and aluminum sectors account for only 0.5% of Canada’s GDP and 3% of overall exports, the broader implications of trade uncertainty are causing concern. Nathan Janzen, an economist at Royal Bank of Canada, notes that Canada’s economy is in “substantially worse shape now” than during Trump’s previous term, making it more vulnerable to trade disruptions.
The effects are already being felt across various sectors. The Canadian Federation of Independent Business reports that over a third of small and medium-sized exporters are experiencing cancelled or paused orders due to tariff threats. Simon Gaudreault, CFIB’s chief economist, warns that “the uncertainty around tariffs is almost as damaging as tariffs themselves”.
The auto industry, deeply integrated with the U.S. market, could face “serious layoffs” within weeks, according to Peter Warrian, an economist at the University of Toronto’s Munk School of Global Affairs and Public Policy. The potential disruption to supply chains that cross borders multiple times during production is a particular concern.
The tariffs could also have a ripple effect on Canada’s housing market. RBC economist Robert Hogue suggests that job losses arising from trade tensions could dampen housing demand, adding another layer of uncertainty to the market.
In response to the tariff threats, Canada has prepared a retaliatory package worth C$155 billion, to be implemented in two phases if necessary. The first phase, targeting C$30 billion in U.S. goods, includes tariffs on cosmetics, appliances, and various food products.
As businesses brace for impact, many are considering delaying expansion plans or reducing their workforce. The CFIB survey reveals that 60% of affected businesses may need to pass on costs to customers if tariffs are imposed.
While Canada weathered similar tariffs during Trump’s previous term, the current economic landscape presents new challenges. The combination of a weaker economy, ongoing productivity concerns, and the potential for reduced business investment paints a concerning picture for Canada’s economic outlook.
As March 12 approaches, all eyes will be on the negotiations between the two countries. The outcome of these talks will not only shape the future of Canada-U.S. trade relations but also have significant implications for Canada’s economic recovery in the post-pandemic era.
Citations:
[1] https://globalnews.ca/news/11013889/donald-trump-tariffs-steel-aluminum-canada-nafta-cusma-timeline/
[2] https://financialpost.com/news/economy/trump-tariffs-steel-aluminum-impact-canada
[3] https://nationalpost.com/news/canada/with-canada-leading-steel-and-aluminum-exports-to-u-s-americans-will-also-feel-bite-of-new-tariffs-experts
[4] https://investors.newscorp.com/static-files/548ea427-f0ec-40ae-8359-d49207151d14
[5] https://www.skadden.com/insights/publications/2025/02/trumps-tariffs-on-canada-mexico-and-china
[6] https://cca-reports.ca/wp-content/uploads/2018/10/2009-06-11-innovation-report-1.pdf
[7] https://www.dal.ca/news/2025/02/11/trump-steel-aluminum-canada-tariffs-trudeau.html
[8] https://www.cbc.ca/news/canada/steel-aluminum-tariffs-roundup-1.7455706
[9] https://www.sec.gov/Archives/edgar/data/1326579/000104746906006573/a2170168z424b3.htm
[10] https://supplychaincompliance.bakermckenzie.com/2025/02/03/trump-tariffs-further-updates-from-canada/
[11] https://www.statista.com/chart/33908/main-sources-of-us-steel-and-aluminum-imports/
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