Following the return of Canadian negotiators and the implementation of 50 per cent U.S. tariffs, the Canadian business community is assessing the impact of these new levies.
Individual business leaders, involved in exporting various products to the U.S., expressed concerns that the high tariffs would severely hamper their business operations with the United States.
Considering the broader economic implications, questions arise about the extent of the damage, the most affected sectors, and the potential consequences for Canadian employment. Here’s a breakdown of the situation.
Projected GDP Impact: BMO
The newly imposed 50 per cent tariffs apply to a range of products totaling approximately $28 billion in Canadian exports to the U.S.
This figure represents only around five per cent of Canada’s total exports to the U.S., which is relatively modest in the overall context, noted BMO senior economist Robert Kavcic.
BMO’s assessment suggests that the 50 per cent tariffs could diminish Canada’s GDP growth by half a percentage point. This reduction is partly attributed to businesses becoming cautious about making new investments crucial for economic expansion under the new tariff regime.
Kavcic pointed out that the timing of these tariffs is unfortunate, coinciding with a period when the Canadian economy was showing signs of recovery. Although growth was lackluster earlier in the year, recent months have witnessed an uptick, setting the stage for a robust second-quarter rebound.
Implications for Specific Industries
While the overall impact may seem limited on a national scale, certain sectors where tariffs are concentrated will experience more acute repercussions.
Kavcic emphasized that although $28 billion is a manageable sum, businesses in industries targeted by the 50 per cent tariffs could essentially lose access to their U.S. market.
An analysis by CBC of export data from the United States International Trade Commission indicates that producers of electronics and electrical equipment will be most severely affected by the tariffs. In 2025, Canada exported over $4 billion worth of electronic goods subject to these tariffs.
Following electronics, plastics rank second with $3 billion in exports, followed closely by furniture, bedding, and lighting at $2.5 billion. Industrial machinery and paper products occupy the fourth and fifth positions, respectively.
The manufacturing of most electronic products, plastics, and furniture occurs in Ontario and Quebec, making these provinces highly vulnerable to the new tariffs.
Additionally, British Columbia will face significant repercussions due to its heavy reliance on paper and wood exports. The newly tariffed items represent over 13 per cent of the province’s total exports to the U.S., the highest rate among all provinces.
Disproportionate Impact on Small Businesses
Aside from major manufacturing sectors, the newly tariffed items encompass a diverse range of consumer goods, including honey, candles, and hockey sticks.
Kavcic highlighted that these products are likely exported by smaller Canadian enterprises and could be easily substituted with American alternatives.
This substitution could disproportionately affect smaller businesses that may lack sufficient financial reserves to withstand the economic challenges. According to the Canadian Federation of Independent Business (CFIB), 40 per cent of its members exporting to the U.S. produce goods affected by the tariffs.
