(Bloomberg) -- Canadian provinces with energy-focused economies are least vulnerable to US tariffs, while the manufacturing centers of Ontario and Quebec will face the most pressure, an economist at Desjardins says.
US President-elect Donald Trump has promised broad levies on US imports, but many analysts think it makes little sense to place tariffs on oil and gas because it would put upward pressure on US gasoline prices. That means the economies of Alberta, Saskatchewan and Newfoundland and Labrador — all crude oil producers — should be spared the worst of Trump’s policy, according to a report from Randall Bartlett, senior director of Canadian economics at the firm.
Ontario is a different story. Canada’s vehicle manufacturing hub produced more than half of Canada’s non-energy exports to the US in 2023, Bartlett wrote. Quebec is also vulnerable as Canada’s second-largest metals and minerals exporter to the US, having “felt the sting” of 10% levies on aluminum during the first Trump presidency, he added.
Trump has said he’ll apply a barrage of new tariffs on US imports — 60% on Chinese goods and 10% to 20% on others. The Canadian automotive industry hopes to see exemptions, given the close ties among manufacturers in the US, Canada and Mexico.
Canadian Industry Minister Francois-Philippe Champagne stressed the need for continental collaboration.
“That’s the case we’re making to our American friends,” Champagne said before the North American Manufacturing Conference in Ottawa on Wednesday. “You may consider tariffs on some in the world, but when you are with your closest trading partners, I’m not sure that this would serve the intended purpose.”
In August, Canada announced it would place a 100% tariff on Chinese electric cars and 25% on Chinese steel and aluminum.
Ontario Premier Doug Ford has argued that Canada should negotiate a bilateral trade agreement with the US, cutting out Mexico unless it joins its regional allies in putting steep tariffs on Chinese-made products. Deputy Prime Minister Chrystia Freeland called Ford’s concerns “legitimate” but stopped short of endorsing the idea.
Bartlett said the tariff hikes have weighed on the firm’s outlook for the Canadian economy. While diplomacy may succeed in carving out exemptions, the key is to lessen exposure to a single country’s policies, he said.
“Canadian policymakers have been trying to encourage greater trade diversification for decades but with little success,” Bartlett wrote. “Maybe another four years of US-driven trade dysfunction will help to make the case.”
--With assistance from Laura Dhillon Kane and Jay Zhao-Murray.
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