Canadian Chamber of Commerce sends stark warning about U.S. trade relationship

A new report from the Canadian Chamber of Commerce warns that protectionist policies, such as Donald Trump's proposed tariffs, could harm the economies of both Canada and the U.S. ahead of the upcoming presidential election.

Authored by University of Calgary economics professor Trevor Tombe, the report highlights how deeply intertwined the two countries' economies are, particularly in sectors like Alberta's energy industry and Ontario's automotive production. While Canadians are aware of the importance of trade with the U.S., Tombe points out that many Americans may not fully understand the extent of this economic relationship, especially during times of geopolitical uncertainty.

The report raises concerns about Trump's plan to implement a 10-per-cent tariff on imports if re-elected. Such a move, Tombe suggests, would negatively impact both economies, with Canada facing an annual economic loss of about $30 billion, and the U.S. seeing costs of approximately $125 billion USD.

Canada's ambassador to the U.S., Kirsten Hillman, has sought to calm fears, stating that it may not be feasible for Washington to apply the tariffs to Canada. However, Tombe warns that if the tariffs were enacted, the consequences could be severe. The report estimates that if countries retaliated with tariffs of their own, Canada could see a 1.5 per cent drop in incomes and a 1.6 per cent decrease in productivity, amounting to $45 billion in lost economic activity.

Tombe compared Trump's proposal to the 1971 "Nixon Shock," when the U.S. imposed a temporary 10-per-cent surcharge on imports, including from Canada. Though the tariff lasted only four months, it resulted in a 2.6 per cent reduction in imports from Canada to the U.S. The potential impact today could be even greater, given the increased complexity of trade between the two countries.

The report also underscores how critical the Canada-U.S. trade relationship is, with Canadian exports playing a key role in U.S. supply chains. Canada is the top export destination for 34 U.S. states, with some, like Michigan and Illinois, having economies significantly tied to Canadian trade. Many of these states are pivotal battlegrounds in the upcoming election, and trade disruptions could disproportionately affect their businesses and citizens.

Former U.S. ambassador to Canada Bruce Heyman echoed these concerns, particularly regarding the potential impact of tariffs on Alberta's oil exports, which primarily go to the U.S. "The risk to Alberta and to the rest of Canada is quite large, and I think it could be quite detrimental to your economy," Heyman said in an interview with CBC Radio's Calgary Eyeopener.

Tombe also highlighted that Ontario and Manitoba could face significant consequences in their auto and transport industries if tariffs were applied, potentially leading to a 20 per cent decline in exports to the U.S. as a share of their output. "That's one-fifth of their overall business, so that's really considerable," Tombe added.

With both U.S. presidential candidates leaning towards protectionist policies, the report stresses the importance of preparing for potential challenges as the Canada-U.S.-Mexico agreement undergoes review in 2026.