CANADA ECONOMICS FEATURE: CIBC Says Canada Would Benefit From Having Many Other U.S. Trading Partners "In the Same Boat"

02:05 PM EDT, 03/21/2025 (MT Newswires) -- Avery Shenfeld in his regular 'The Week Ahead' column noted that Canadians were shocked to be the first country targeted for tariffs by the Trump Administration, alongside Mexico and China. But he also noted that with a few exceptions, the tariffs were postponed until April 2nd for goods qualifying under USMCA. At that point, Canada could find itself joined by a long list of American trade partners being subject to "reciprocal tariffs", if not necessarily levies that US officials will be ready to implement immediately, as well as tariffs on specific sectors like autos.

Shenfeld writes: "In this case, in terms of the implications for Canada, misery loves company. Both the impacts on our exports to the US, as well as our odds of negotiating these tariffs down to a manageable size, would be improved by having many other US trading partners in the same boat.

"If the tariffs stick, the damage to Canada's US market share will be reduced if all imports are facing a similar tariff as Canada. Otherwise, a vehicle assembled in Canada would be at a huge competitive disadvantage to one coming from Europe or Asia. There's still a bias against Canada if the auto tariffs are similar, because a Canadian vehicle will have faced tariffs on parts or metals that started in Canada, were hit by a tariff when sent to the US for the next stage of production, and then returned to Canada for the final assembly. But in less complex supply chains, we might end up on a more level playing field with other imports into the US.

"That cushioning impact will be greater in sectors where Canada's share of total US imports is small, but where other imports have a significant share of the market in total, so that we're facing less competition from tariff-free US supplies." [At this point in the column, Shenfeld cited a table showing that fishing, base metal manufacturing and mining have sizeable foreign content, while Canada is largely competing with American suppliers in sectors like wood, metal products and paper products].

Shenfeld continued: "If other countries find themselves in a protracted trade war, their retaliatory tariffs, or consumer boycotts against US exports, will find them seeking non-US suppliers. At the margin, that may open up markets in Europe or Asia to some additional volumes from Canada, although frayed relations with China and India could cut into those opportunities.

"Negotiating a cooling in tariff levels will also be easier if our misery is shared by other countries facing new US tariffs. Canada's retaliatory tariffs, or Canadians acting on their own to avoid American goods or travel destinations, will hurt US companies, who will lobby for a settlement. But that damage to US exports and tourism would be much higher if we also see retaliation from America's European and Asian trading partners. The inflation impacts will also be magnified, leaving greater pressure on the White House from consumers.

"Finally, it may well be that, to fulfill an election pledge, the President feels that he needs to end up leaving some substantial tariffs in place when any negotiations come to an end. Perhaps some elevated tariffs on other countries that have greater barriers to US goods will help meet that political need, leaving more elbow room for Canada to escape some of the Administration's protectionist wrath. Unless, of course, the President is really set on having his 51st state."

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