How much will U.S. tariffs affect Canada?

RBC assistant chief economist Nathan Janzen says the latest U.S. trade measures against Canada sound more severe than they are likely to be for the broader economy.

“The U.S. administration’s latest response to Canada’s retaliatory tariffs following the breakdown of bilateral trade negotiations may sound alarming, but they represent a relatively minor escalation in the trade war,” Janzen said in his Sept. 9 report.

The new measures include changes to the list of Canadian products subject to 50% tariffs under Section 338, effective Sept. 15. Janzen said some products were added, but others were removed, leaving the dollar value of affected imports roughly balanced.

The economist said the 50% tariffs still affect about 5% of U.S. imports from Canada. That is disruptive for targeted sectors, but the broader economic impact remains limited.

The U.S. will also impose import bans on certain alcohol, dairy and motorcycle products as of Sept. 29. Janzen said those products were already subject to 50% tariffs, meaning many were likely already too expensive for U.S. importers.

He said the marginal impact on Canada’s economy is therefore likely small, though the effect on specific exporters could be significant.

Janzen said the bigger risk remains a broader tit-for-tat trade war covering a much larger share of Canada-U.S. trade. That has not happened yet.

He also noted President Trump’s threat to remove Canadian products from some U.S. government procurement contracts, though details remain unclear.

Janzen said the U.S. General Services Administration’s Multiple Award Schedule accounts for about US$50-billion of government procurement spending a year, a small share of the overall U.S. government procurement market.

Overall, he said the latest measures could have been worse, but they keep uncertainty elevated for targeted Canadian exporters.

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