Trump’s latest trade actions are ‘not an escalation,’ economist says

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OTTAWA – The economic impact from U.S. President Donald Trump’s latest series of presidential proclamations targeting trade with Canada will not have significant impact on the Canadian economy, according to economists.

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“I think the overall effect might be limited,” said Trevor Tombe, economist and professor at the University of Calgary. “Adjusting what products are covered by the tariffs isn’t something that should be, in my view, interpreted as escalation.”

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The orders from Trump also ban some dairy products and motorcycles, while adding more products to the list of Canadian exports subject to 50 per cent tariffs that came into effect last month.

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Trump also removed 50 per cent tariffs from several products, including toilet paper, cement, bedsheets and salt. The bans will come into effect at the end of this month, and the modification of tariffs under Section 338 of the Tariff Act of 1930 will take effect on Sept. 15.

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“They realized they had hit things that they shouldn’t have, and so they took about $1.7 billion dollars off their list, added different products, almost as a one-for-one swap,” said William Pellerin, international trade partner at McMillan LLP, noting that the newly added items on the tariff list amount to about $1.8 billion.

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Pellerin, like Tombe, said Trump’s latest announcement should not be interpreted as a major escalation in the trade conflict between Canada and the U.S.

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However, one industry that is set to be hit the hard is the Canadian alcohol industry, with outright bans on Canadian alcohol products.

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Tombe said the ban will impact 90 per cent of Canadian alcohol exports to the U.S., adding that roughly 13 per cent of Canadian alcohol production is exported to our southern neighbour.

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It is the first time Trump has used import bans, which Capital Economics economist Stephen Brown interprets as bad news for the possibility of resolving the trade dispute and renewing the Canada-United States-Mexico Agreement (CUSMA).

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“Nonetheless, Trump’s willingness to impose an import ban is further evidence, if it were needed, that these latest measures are about inflicting economic pain rather than raising revenue,” said Brown, in a note to clients.

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“That calls into question our assumption that the sides will eventually resolve their broader differences around the USMCA, leaving the agreement in limbo and at risk of breaking down entirely,” he added.

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Brown estimates the bans will impact just 0.25 per cent of Canadian exports to the U.S.