Desjardins flags double tariff shock for Canadian manufacturers as counter-levies take effect
Canadian counter-tariffs may intensify tariff pressures on manufacturers and other sectors by raising costs for U.S.-sourced inputs and complicating supply chains.
Canadian counter-tariffs on $28 billion of U.S. imports took effect Sept. 8, following additional U.S. duties imposed Aug. 22 after bilateral trade talks broke down. Desjardins principal economist Florence Jean-Jacobs said several manufacturing sectors could face a “double shock” from U.S. tariffs on Canadian exports and Canadian retaliatory levies on U.S. imports. [1]
Manufacturing remains especially exposed, having already faced U.S. tariffs on autos, steel and aluminum, and pulp and paper. New 50 per cent U.S. tariffs under Section 338 expanded the affected industries to chemicals, machinery, electrical, computer and electronic products, plastics and rubber, textiles, and alcoholic beverages. [1]
Desjardins identified electrical equipment, appliances and components with $12.8 billion in annual exports to the United States; computer and electronic products with $11.5 billion; and textiles, clothing and related products with $3.3 billion as exposed on both tariff fronts. Plastics and rubber products, furniture and related products, and alcoholic beverages were also cited, with the beverage sector’s vulnerability largely tied to required glass and metal containers. [1]
Canada’s counter-tariffs target U.S. exports including steel and aluminum, dairy products, household appliances, agricultural equipment, pulp and paper, plastics and electronics. Jean-Jacobs said the most damaging effects could occur where tariffs apply to widely used inputs that Canadian businesses cannot readily replace. Some food inputs, including whey powder, milk and cream products, honey, molasses, and bakery mixes and doughs, are affected, although domestic sourcing may be available for those products. [1]
Wholesale and retail businesses could be affected if tariff-driven price increases deter consumers, while construction could face higher costs and project delays because the levies cover HVAC equipment, forged and stamped metal products, lighting, motors, turbines and power-transmission equipment. The report also noted that some importers could shift to Canadian steel producers, though specialty-product requirements and shipping distances may constrain substitution. It characterized supplier diversification in Canada and abroad as difficult but potentially supportive of a less U.S.-dependent economy. [1]
Significance is moderate because the Desjardins assessment indicates that counter-tariffs may compound existing U.S. tariff exposure for manufacturers and create input-cost and supply-chain risks for wholesale, retail and construction activity. The impact is prospective rather than a measure of realized production, employment or consumer-price effects, and the analysis identifies potential domestic substitution in some categories. [1]