Posthaste: How Canada’s counter tariffs could pile more pain on the economy

Canada’s counter tariffs hitting back at U.S. President Donald Trump’s recent foray in the trade war will just drag on growth and raise prices for Canadians, economists warn.

In response to Trump’s 50-per-cent tariffs on $28-billion worth of Canadian goods imposed after trade talks broke down in late August, Prime Minister Mark Carney announced duties “dollar for dollar” on about eight per cent of Canada’s imports from the United States.

These tariffs, set to start Sept. 8, raise existing duties on some products such as steel and aluminum products to 50 per cent, and put new penalties on machinery, paper, electrical equipment, furniture and plastics.

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But rather than helping Canada, the counter tariffs amount to an own goal on the Canadian economy, concludes an analysis by Oxford Economics.

“Canada’s new retaliatory tariffs will help some industries but hurt most and weaken economic growth across the country by raising costs for producers and consumers,” said Oxford economists Tony Stillo and Michael Davenport in the report.

Oxford estimates that the combined impact of both U.S. and Canadian tariffs will shave about 0.3 per cent off its previous forecast for output in 2027. That impact is estimated to double by 2035 as the knock-on effects spread to the broader economy.

The economists also predict that Canada’s inflation rate will rise 0.5 percentage points in 2027 above their previous forecast as producer prices climb. The impact on prices will continue to build through 2030.

“Canadian tariffs on U.S. products effectively act as a tax on the domestic economy,” said the economists.

“This will weigh on household disposable income and profit margins for firms, and create a broader drag on the Canadian economy beyond directly affected sectors.”