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As Canada awoke to the first day of a trade war with the U.S. on Sunday, CKOM/CJME business analyst Paul Martin said people should be prepared for the fact that the “price of everything” is about to go up.
Martin said the U.S. tariffs were well signalled.
“There’s some comfort in having the clarity, so we know what we’re up against,” he said.
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Martin said how long until price rises are seen on store shelves is a matter of how much stock and inventory there is right now, and how long it lasts.
“You may not see it on Tuesday when the tariffs come in, but you’re going to see it fairly shortly after, because supply chains are very short, and we have a very integrated North American economy,” he said.
Every product line will likely have a different timeline attached to it, but it’s reasonable to think that no one on either side of the border would have stockpiled more than 30 days’ worth of supplies.
What could really hit people in their pocketbooks is the price of groceries.
“You’re going to see the price of imported fruits, vegetables — those kinds of things — we don’t have much of a supply chain in Canada for that in the wintertime. We rely very heavily on the U.S. and Mexico as well,” he explained.
We don’t know yet whether products Canada imports from Mexico that travel through the U.S. to Canada will be hit with tariffs more than once.
“Your avocados, will (they) be impacted? Hard to say… that’s the questions that have to be sorted out here. Or, do the Mexicans find a way to fly around the U.S. so we avoid the tariffs? Air freight’s a whole lot more expensive than ground transportation, so that’ll increase the price of goods, too,” Martin said.
The last time Trump slapped tariffs on Canada was in 2018, and that was on industrial goods like steel and aluminum. This time, it’s across the board.
Martin believes that while we need to see how this all plays out, relations between Canada and the U.S. will be damaged. The fallout could even affect different regions of Canada if one part of the country believes it’s suffering the consequences of the tariffs more than others.
“If there’s an east-west split on this thing in terms of perception that one part of the country is paying a higher price on tariffs than another … there could be an internal fight, too.”
He said Canada can “do a lot better” by minimizing internal trade barriers as well.
Restricting trade ‘harms people’
Jason Childs, a professor of economics at the University of Regina, said any tariffs would cause harm.
“Anytime you get a restriction in trade, you generally make both parties poor,” he said. “So restricting trade tends to harm people, and that’s that’s something I think we should avoid.”
Like Martin, Childs said Canadians would see a price jump right away at the grocery store.
“So with fresh vegetables coming from the U.S. (for example), you’re going to get hit with a higher price fairly quickly,” he said.
Childs said two things would happen as a result of any tariffs.
“The U.S. are going to buy less stuff from us and they’re going to be willing to pay us a lower price net of the tariffs.”
If the tariff war persists, Childs said it would take a huge bite out of the Canadian economy, especially in Alberta and Saskatchewan.
He also said the Canadian dollar could drop.
“If our interest rates fall and the U.S. rates don’t, the Canadian dollar tends to fall in value most of the time,” he said.
“If we get these tariffs and we end up taking the big hit, then that’s going to put negative pressure on the dollar, and the dollar could drop as low as … 63, 62 cents U.S. We could take a big hit.”
He also said he wanted to know the nature of Canada’s “exit strategy.”
“We did this (tariffs) in Trump’s first presidency with steel and some other products, and the exit strategy was essentially a change in government,” he said.
“So is the exit strategy for our federal government four years of pain and misery and wait for the next federal election in the U.S.? I’m not convinced that’s a great strategy.”
— with files from 980 CJME’s Nicole Garn
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