Big news today for the global economy – last night at 12:01am, President Trump raised tariffs from 10 to 25 % on 200 billion dollars worth of imports from China.
We’re following this closely today to understand what it means for the Canadian economy.
We see both positives and negatives, but overwhelmingly this will be negative for the Canadian economy moving forward.
Let me start with the positives. First of all, there is potential for some substitution of Canadian products for U.S. products in the Chinese market. For example, last year when the Chinese retaliated against U.S. lobster, Canadian exports of lobster increased by 50%
Now turning to the negatives: the first impact will be on Canadian supply chains that are totally integrated in the U.S. As prices go up due to these tariff hikes, this will ultimately be passed on through the Canadian companies.
Secondly, there’s damage to the agricultural sector as a result of this escalating conflict. Just today, we saw soy futures hit 10-year lows.
And finally, as the U.S. economy suffers as a result of this conflict, ultimately this will hurt the Canadian economy. We rely on U.S. demand, and if the U.S. is flagging, so will the Canadian economy.
So what does this all mean? Well, we can’t control the actions of foreign countries; what we can do is implement pro-growth policies now to make sure that the Canadian economy is set up for success moving forward.