Canadian Chamber of Commerce warns of protectionism ahead of U.S. election

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

Authored by Trevor Tombe, an economics professor at the University of Calgary, the report highlights that while most Canadians understand the importance of trade with the U.S., many Americans are unaware of how deeply interconnected the two economies are, particularly in the current geopolitical climate. Canadian officials and business groups have been engaging with both Democratic and Republican counterparts in the U.S. to prepare for any potential election outcome, as both presidential candidates have promoted protectionist agendas that could disrupt Canadian trade.

Tombe pointed out that both political parties in the U.S. have been moving toward protectionism for some time. Vice-President Kamala Harris has expressed opposition to the NAFTA replacement, criticizing it for allowing U.S. jobs to be outsourced. On the other hand, Trump has proposed a 10 per cent tariff on imports if re-elected, raising concerns in both countries.

Canada’s ambassador to the U.S., Kirsten Hillman, has attempted to ease worries, suggesting that Washington may find it difficult to apply such tariffs to Canada. However, Tombe’s report estimates that if Trump’s tariffs were enacted, the Canadian economy could shrink by up to one per cent, leading to a $30 billion annual loss. The U.S. could face even steeper costs, with an estimated $125 billion economic impact. If other countries retaliated with tariffs of their own, Canada’s losses could increase to $45 billion annually, a scenario Tombe compared to a significant recession.

Historically, similar protectionist measures have been implemented, such as the 1971 "Nixon Shock," which temporarily imposed a 10 per cent surcharge on imports, including from Canada. Although the tariff lasted only four months, it led to a 2.6 per cent reduction in Canadian exports to the U.S. Tombe noted that today’s more complex trade relationship between the two nations would likely magnify such effects.

The report emphasized the immense and interdependent economic relationship between Canada and the U.S., which is built on intricate supply chains and investments across various sectors. Canadian exports serve as critical inputs for U.S. businesses, impacting industries across 34 states, including key battleground states like Michigan, Illinois, and Wisconsin. Disruption in trade policies, according to Tombe, would have significant consequences for businesses and citizens on both sides of the border.