March 26, 2025: Trump says US will charge 25% tariff on all cars not made in the US.
Navigating the Proposed Tariffs: What Canadian Business Leaders Need to Know
Industry-leading insights and our latest resources to help Canadian business leaders navigate tariff changes with confidence.
TEC Canada is committed to providing CEOs and business leaders with real-time updates and expert perspectives to help them make informed decisions. This page will be continually updated with:
Latest News & Policy Updates | Tariffs and Trade Policy
Stay informed on evolving trade regulations and their implications.
March 13, 2025: It’s Prime Minister Justin Trudeau’s last day in power, and his replacement, Mark Carney, said he’s ready to sit at the negotiating table with U.S. President Donald Trump so long as Canada’s sovereignty is respected. In the Oval Office, Trump said today Canada could keep its anthem if it became a state. Meanwhile, the trade war continues. Trump’s 25 percent tariffs on steel and aluminum are in effect, and so are Canada’s countermeasures on $30 billion worth of U.S. goods.
March 12, 2025: Trump metals tariffs draw swift retaliation from Canada and EU | Canada imposes C$29.8 bln in retaliatory tariffs
March 11, 2025: President Trump announced that new retaliatory tariffs on Canada, which were scheduled to take effect on Wednesday, would be raised to 50% instead of the previously planned 25%. He asserted that the only solution was for Canada to join the United States. However, he later reversed his decision after Ontario agreed not to impose tariffs on electricity exports.
March 7, 2025 (Reuters): Canada on Friday unveiled billions of dollars in aid and other forms of support to businesses and people expected to be directly affected by U.S. tariffs. These relief measures involve over C$6.5 billion ($4.52 billion) of financial aid to help companies tap new international markets, absorb the impact of losses, access easy loans and prevent layoffs, a team of ministers said.
March 6, 2025: The Trump administration will delay imposing 25% tariffs on Canada and Mexico for goods and services compliant with the USMCA trade agreement. The waiver will last until April 2, Commerce Secretary Howard Lutnick said Thursday, adding that he hopes the two nations will do “a good enough job” combating the flow of fentanyl. President Trump intends to introduce fresh tariffs next month, including reciprocal levies and industry-specific ones on cars, pharmaceuticals and semiconductors.
March 5, 2025: Trudeau outlines response to U.S. tariffs, says Canada will ‘relentlessly’ fight to protect the economy
Prime Minister Justin Trudeau, speaking from Parliament Hill on Tuesday, says Canada will immediately start imposing tariffs on $30 billion worth of U.S. goods. Trudeau said tariffs will be imposed on the remaining $125 billion of American products in 21 days as a response to U.S. tariffs that went into effect on Canada Tuesday.
March 4, 2025: Trump triggers trade war, price hikes with tariffs on Canada, China and Mexico
Overview
On March 4, U.S. President Donald Trump imposed new 25% tariffs on imports from Canada, Mexico, and China, escalating trade tensions and introducing new economic uncertainties. The tariffs, which Trump claims are aimed at addressing trade imbalances and the flow of fentanyl into the U.S., could disrupt $2.2 trillion in annual trade and lead to higher costs for businesses and consumers across North America.
Key Developments & Reactions
- Immediate Tariff Impact:
- The U.S. has introduced 25% tariffs on Canadian and Mexican goods and new duties on Chinese imports.
- Further tariffs are planned for April 2, including “reciprocal tariffs” aimed at countries with existing duties on U.S. goods.
- Key affected sectors include electronics, agriculture, consumer goods, and automotive.
- Canadian Government Response:
- Prime Minister Justin Trudeau called the tariffs “a very dumb thing to do” and responded with 25% tariffs on C$30 billion ($20.7B USD) worth of U.S. imports, including food, beverages, appliances, and motorcycles.
- Trudeau warned that Canada will escalate tariffs to C$125 billion if the U.S. does not reverse course within 21 days, likely affecting automobiles, steel, aircraft, beef, and pork.
- Ontario Premier Doug Ford retaliated by:
- Canceling a C$100 million contract with Elon Musk’s Starlink network.
- Banning U.S. firms from Ontario government contracts.
- Threatening a 25% surcharge on Ontario’s electricity exports to the U.S.
- Mexico’s Response:
- President Claudia Sheinbaum vowed retaliatory measures, with details expected on March 10.
- China’s Response:
- China immediately imposed 10-15% retaliatory tariffs on U.S. goods, particularly targeting agriculture and manufacturing.
- The Chinese government stated it is prepared for a “tariff war, a trade war, or any other type of war”.
Economic Implications
- Stock Market & Currency Reactions:
- The tariffs triggered a global stock sell-off.
- The Canadian dollar and Mexican peso initially dropped but recovered slightly after U.S. officials suggested a potential partial resolution.
- Higher Prices for Consumers:
- Target CEO Brian Cornell confirmed that U.S. retail prices on imported goods, including avocados, grocery products, and electronics, will increase within days.
- Best Buy CEO Corie Barry warned of higher costs for electronics, as China and Mexico are top sources for U.S. consumer technology.
- Economists estimate the tariffs could lead to an extra $1,000 in annual costs per U.S. household.
- Potential Economic Slowdown:
- The Federal Reserve Bank of Atlanta revised its U.S. GDP outlook from +2.3% growth to a -2.8% contraction in Q1 2025.
- Experts warn that a prolonged trade war could halt North America’s economic momentum, with severe consequences for manufacturing, exports, and cross-border business operations.
What’s Next?
- March 10: China’s new tariffs take effect.
- March 24: Canada may expand its tariff list if U.S. duties remain in place.
- April 2: The U.S. is set to introduce additional tariffs on more goods.
- Ongoing: Talks between the U.S., Canada, and Mexico could lead to modifications but are unlikely to eliminate the tariffs entirely.
Conclusion
The trade war between the U.S., Canada, and its key partners is escalating, with retaliatory tariffs, economic disruptions, and rising costs threatening business operations across North America. TEC Canada members should monitor developments closely, as the situation continues to evolve.
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Feb 24, 2025: Canada & Mexico Intensify Border Talks to Avoid U.S. Tariffs
Canada and Mexico are ramping up efforts to prevent the implementation of punishing 25% tariffs on their exports to the U.S., set to take effect on March 4. These tariffs could severely impact the integrated North American economy, affecting key industries such as automotive, energy, and manufacturing.
Key Developments:
- Increased Border Security – Both countries have enhanced their enforcement efforts, with Mexico deploying 10,000 national guard troops to its northern border and Canada appointing a “fentanyl czar” to combat opioid smuggling.
- Ongoing Negotiations – Discussions this week, alongside reports from the U.S. Department of Homeland Security, will determine whether the Trump administration extends the tariff suspension.
- Retaliation in Play – Canadian Prime Minister Justin Trudeau has warned of retaliatory tariffs on $107 billion worth of U.S. imports, including American beer, bourbon, and Florida orange juice.
Even if a temporary extension is granted, trade experts suggest that tariff threats will likely remain in place until clear evidence shows that these new measures are effectively reducing fentanyl smuggling and illegal migration.
This situation could also accelerate discussions on renegotiating the U.S.-Mexico-Canada Agreement (USMCA) ahead of its scheduled 2026 review.
With so much at stake for Canadian businesses, TEC Canada will continue to monitor developments and provide insights on how leaders can navigate these potential disruptions.
This article summarizes reporting by David Lawder for Thomson Reuters, please read the original article here.
Tariffs and Trade Policy | Resources & Tools Worth Sharing
A curated collection of resources and tools we believe are valuable for Canadian businesses as they navigate short- and long-term strategies while adapting to the evolving Canada-US trade landscape.
Across Canada, businesses are feeling the impact of market uncertainty. Export Development Canada (EDC) understands the challenges that exporters—the primary contributors to our economy—are confronting. For more than 80 years, EDC has stood tall when Canadian companies needed them most. Now, EDC is moving quickly to provide meaningful support to Canadian exporters and investors as you adjust and adapt to these new market realities.
The EDC Trade Impact Program will facilitate an additional $5 billion over two years in support for eligible companies across a range of products to help you navigate economic challenges.
If you’re an eligible Canadian exporter, or a company that supplies exporters, here’s EDC can help:
- Export confidently: EDC trade credit insurance protects against losses in the event of non-payment from your foreign buyer.
- Manage currency fluctuations: EDC offers solutions that mitigate the risks associated with foreign exchange fluctuations by stabilizing your costs and protecting your profit margins from adverse currency movements.
- Access more working capital:Â EDC guarantees share a portion of your financial institution’s risk, allowing you to access more financing for managing cash flow challenges and growing your operations.
- Enable global expansion:Â EDC’s financing solutions enable you to increase your capacity for trade, expand your footprint in different markets, or acquire a foreign company.
With $5 billion in additional capacity already allocated, EDC is ready to meet heightened demand for its financing and insurance solutions.
As trade conditions are sure to remain fluid, EDC will continue to adjust their support to meet your changing needs. EDC’s priority is to provide meaningful and timely support to Canadian exporters, so you can focus on what you do best: Provide the goods and services the world wants.
The priority of Export Development Canada (EDC) is to provide meaningful and timely support to Canadian exporters, so you can focus on what you do best: Provide the goods and services the world wants.
How Canadian SMEs Can Navigate the Looming U.S.-Canada Tariffs
For small and medium-sized enterprises (SMEs) in Canada that depend on cross-border trade, uncertainty surrounding tariffs is becoming an increasingly pressing issue. Whether they export goods to the U.S. or rely on American imports to keep operations running, businesses are facing a tough reality: higher costs could force them to either raise prices—risking customer loss—or absorb the financial hit, shrinking already tight margins.
With the possibility of new U.S.-imposed tariffs, Canadian SMEs must brace for significant shifts in trade dynamics. As one agriculture business owner in Ontario put it, “90% of our production goes to the U.S. If a 25% tariff is implemented, all our forecasts are out the window. We’ll have to pass on the tariffs through price increases, but that won’t happen overnight.”
The Canada-U.S. Trade Relationship: A Critical Connection
Canada’s trade with the U.S. has long been one of the world’s strongest economic partnerships, largely supported by the Canada-United States-Mexico Agreement (CUSMA). In 2023, nearly half (49.5%) of Canada’s total imports came from the U.S., while 77% of Canadian exports were destined for American buyers. SMEs play a vital role in this trade flow, contributing to about 40% of exports and accounting for 97% of all exporting businesses. On the import side, SMEs represent 42% of the trade value and 98% of importing enterprises.
The U.S. maintains a trade deficit with Canada, running at approximately $60 billion CAD in 2023—equal to roughly 0.2% of U.S. nominal GDP. This underscores the depth of economic integration between the two countries, especially when compared to America’s trade relationships with Mexico, China, and Germany.
One of the most significant aspects of this trade is the energy sector, which accounted for one-quarter of U.S. imports from Canada last year. Canada is the U.S.’s largest supplier of energy imports, including crude oil, natural gas, and electricity. SMEs play a substantial role in this sector, contributing to 31% of the industry’s total export value. The reliance of both countries on energy trade makes this a focal point in tariff discussions, with any disruptions likely to have ripple effects on employment and supply chains.
Additionally, the Canadian and U.S. economies are closely linked in manufacturing. More than 65% of Canadian exports to the U.S. and nearly half of U.S. exports to Canada consist of intermediate goods—materials used in the production of final products. Tariffs on these goods could significantly increase costs for manufacturers on both sides of the border.
How Tariffs Are Impacting Canadian SMEs
For Canadian businesses engaged in cross-border trade, the uncertainty surrounding potential tariffs is already taking a toll. A December 2024 survey found that 82% of SMEs trading with the U.S. expect major disruptions if tariffs are imposed. These concerns include increased costs, rising prices for Canadian consumers, potential contract losses, and the need to find alternative suppliers.
Even in the absence of immediate tariffs, businesses are seeing rising costs, largely due to supply chain disruptions and a weakening Canadian dollar. Among surveyed SMEs:
- 39% reported declining customer demand,
- 34% faced postponed or cancelled contracts,
- 27% estimated it would take six months or longer to pivot to new suppliers,
- 50% believed shifting to new markets would be a prolonged process.
For some businesses, the risks are existential. A retail business in Nova Scotia noted that “All parts we use are U.S.-based. There are no other suppliers. Adding 25% to our total cost would be unacceptable to customers. This would destroy our business.”
While the Canadian dollar’s depreciation might provide a short-term boost to exporters, the benefits could be negated by retaliatory tariffs from the federal government, further escalating the challenge for SMEs.
How Canadian SMEs Are Responding
As uncertainty looms, many business owners are already taking proactive steps to mitigate potential fallout. A recent CFIB survey found that:
- 44% of SMEs are seeking alternative suppliers,
- 25% have postponed expansion plans,
- 19% are reducing their workforce,
- 18% are exploring new markets or seeking external advice.
These efforts highlight a shift toward resilience and adaptability, but they also underscore the reality that not all businesses have the flexibility to pivot quickly. Some sectors, particularly those dealing with highly specialized goods, have no viable alternative suppliers outside the U.S.
Policy Measures to Support Canadian Businesses
To help mitigate the impact of tariffs and support SMEs, policymakers should consider the following actions:
- Strengthening the competitive landscape for SMEs by reducing tax burdens, cutting red tape, and addressing interprovincial trade barriers.
- Expanding access to trade support services, ensuring small businesses can leverage government programs like the Trade Commissioner Service (TCS) and Export Development Canada (EDC).
- Implementing tariff relief programs that directly support SMEs affected by trade disruptions.
- Enhancing work-sharing programs to help businesses retain employees during economic downturns caused by trade uncertainty.
- Engaging in consistent dialogue with SMEs and business advocacy groups like CFIB to ensure trade policies reflect the real challenges faced by entrepreneurs.
Looking Ahead
With tariff negotiations still uncertain, Canadian SMEs must remain vigilant and proactive in their approach. Businesses will need to explore alternative supply chains, seek efficiencies, and consider diversifying markets where possible. While the road ahead presents challenges, those who plan strategically and leverage available resources will be better positioned to weather the storm.
Source: Adapted from Basta and Milan Nguyen, “Navigating the Looming U.S.-Canada Tariffs: The Impact on Canadian SMEs and Their Next Steps”, CFIB, InsightBiz blog, February 17, 2025, https://www.cfib-fcei.ca/en/research-economic-analysis/navigating-the-looming-u.s.-tariffs-the-impact-on-canadian-smes-and-their-next-steps.
In response to ongoing tariff discussions, Canadian businesses are adjusting strategies to mitigate risks and maintain stability.
Tracking the Impact of the New Trump Tariffs
As the U.S. implements a new wave of tariffs on key trading partners—including Canada, Mexico, China, and the EU—the economic effects are beginning to take shape.
🔹 Tariff Scope & Impact:
- Canada and Mexico face 25% tariffs, with temporary exemptions for certain industries.
- China saw an initial 10% tariff, later increased to 20%.
- The EU faces 25% tariffs, with additional levies on steel, aluminum, autos, and semiconductors.
🔹 Projected Economic Fallout:
- U.S. GDP is expected to decline by 0.4%, with 309,000 full-time jobs lost due to imposed tariffs.
- If additional tariffs take effect (on autos and EU imports), GDP could shrink by another 0.3% and job losses could reach 545,000.
- Retaliation from Canada, China, and the EU is already underway, targeting U.S. exports in agriculture, steel, and consumer goods.
🔹 Canada’s Position:
- With 90% of Alberta’s exports heading south, its economy could be one of the hardest hit.
- Ontario’s auto industry and Quebec’s aerospace sector face significant risk due to their reliance on U.S. trade.
- Atlantic Canada, with a service-heavy economy, may be more insulated from the worst effects.
With global trade tensions escalating, Canadian business leaders must assess the risks and opportunities in this rapidly evolving landscape. Read more.
This tool from the Business Data Lab (BDL) and the Canadian Chamber of Commerce, explores provincial ties to the $3.6 Billion in daily Canada-U.S. trade that supports jobs on both sides of the border.
This tool from the Business Data Lab (BDL) and the Canadian Chamber of Commerce, explores provincial ties to the $3.6 Billion in daily Canada-U.S. trade that supports jobs on both sides of the border.
Most Requested Resources
Services and information
Tariff information and Harmonized System codes
Resources to identify tariff information for goods with HS codes
Canadian customs tariff
Tariff classifications for goods you want to import into Canada, apply for refunds
Export and import controls
Permits, certificates, policy notices, control systems, printable forms and guides
Canadian sanctions
Current and former sanctions and related measures, Canadian legislation, permits and certificates, listed person
Responsible business conduct abroad
Canada’s approach to settling disputes, standards, anti-corruption and due diligence
Trade agreements, negotiations and consultations
International trade and investment agreements, negotiations, impact assessments and consultations
Tariff and duty information, sanctions, export and import controls and other rules that affect Canadian traders.
The Canada Tariff Finder is a free online tool designed to help Canadian entrepreneurs who plan to import or export products. It allows users to search for products by keyword or Harmonized System (HS) code. Developed in collaboration with BDC, EDC, and the Canadian Trade Commissioner Service of Global Affairs Canada, this tool provides valuable tariff information to support international trade decisions.
Webinars Worth Watching
With new tariffs reshaping Canada-US trade, these TEC Canada webinars offer timely analysis and actionable strategies for business leaders. Join experts as they discuss economic implications, government responses, and what it all means for your business.
Analysis & Economic Insights
Hear from leading economists, trade specialists, and TEC Canada members at the forefront of the evolving Canada-US trade relationship.
Charles St-Arnaud
Chief Economist at Credit Union Central Alberta
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US tariffs of 25% on all imported Canadian goods, except for energy taxed at 10%, came into effect. In response, the Canadian government announced 25% tariffs on $155bn worth of US goods.
Ontario, New Brunswick and Quebec will be the most affected. While lower tariffs on energy exports would suggest Alberta will be less affected than other provinces, this is not the case, with the hit on GDP and employment remaining elevated.
How long will tariffs be in place and what can Canada offer to have them removed? Even if the current tariffs were to be paused, President Trump has announced or expressed his plan for other ways to impose tariffs on Canada (steel, aluminum and copper, reciprocal tariffs on agricultural products, car imports, etc.) (see https://bit.ly/41ygxRQ). Essentially, tariffs could just take another form. Whether tariffs are legal or not under the USMCA is completely irrelevant, as a lot of permanent damage can be done just by imposing them.
President Trump and his advisors have suggested various reasons for imposing tariffs. These can be divided into four categories: 1) bargaining chips to extract concessions or favours from other countries, 2) means for other countries to pay for US’ services, such as its “security umbrella”, 3) to gain access to resources or new territory, and 4) repatriate production and investments to the US.
The Canadian economy is likely headed toward a recession in 2025 and there is a risk that knock-on effects could exacerbate the impact of the tariffs on the economy, especially if job losses become important.
Since tariffs are a negative supply shock, fiscal policy may be a better tool to mitigate its economic impact, as it can be better target sectors/regions needing support. Blanket income replacements such as those put in place during the pandemic should be avoided, especially since – contrary to the COVID shock – the shock from tariffs will be more permanent.
Canada’s response should be to improve its investment attractiveness, competitiveness and productivity. Canada should also actively engage with allies to diversify its markets and invest in critical infrastructures to support trade diversification.
The monetary policy response will depend on whether the deflationary pressures from lost input, or the inflationary pressures from tariffs themselves and a weaker Canadian dollar are more important.
We believe that the BoC is likely to focus more on the loss of output. With this, we expect the Bank of Canada to cut its policy rate, if the tariffs remain in effect. However, the size of cuts is uncertain. Given the magnitude of the shock on the economy, it is likely that the BoC may decide to reduce its policy rate by more than 25bp and opt for a 50bp reduction and front-load the monetary support.
The question is how low rates could go and how quickly; given slower population growth in 2025 and 2026, the neutral rate will be pushed lower (see https://bit.ly/4ghFDZX).
Tariffs have become a significant concern for businesses across industries. While some companies may assume these trade policies are temporary, history suggests otherwise. Tariffs often lead to structural shifts that businesses must adapt to in order to protect profitability and sustain long-term success.
To provide clarity and actionable insights, Colten Esser, Manager of Strategy & Research at TEC Canada, sat down with Avy Punwasee and Michael Stanisz, Partners at Revenue Management Labs. In this discussion, they explore the lasting impact of tariffs, effective pricing strategies, and key considerations for business leaders navigating these financial challenges.
Are Tariffs Here to Stay?
Colten Esser: Let’s start with the big question: Are tariffs here to stay? What are the chances we’ll see increases or, hopefully, decreases?
Avy Punwasee: Historically, once tariffs are enacted, they tend to be quite sticky. Removing them requires navigating complex bureaucratic processes, which means companies need to prepare for the long haul. Burying your head in the sand and assuming tariffs will be repealed in six months is not a sound business strategy.
Michael Stanisz: I completely agree. If you look at steel tariffs implemented in 2018, they’re still in place today. Even when tariffs are lifted, they often create long-term market shifts that are difficult to reverse. We’ve worked with businesses that faced tariffs for only a short period, but they are still feeling the effects years later.
First Steps: How to Manage Tariff Impacts
Colten Esser: What are the first steps businesses should take when dealing with tariff-related pricing challenges?
Avy Punwasee: There are three critical areas to assess:
- Financial Impact: Businesses must analyze their cost structure and determine the exact financial impact of tariffs.
- Competitive Landscape: Companies need to evaluate how competitors are responding to tariffs. Are they absorbing costs, passing them on, or finding alternative solutions?
- Customer Behavior: Some customers have fixed budgets and can’t immediately adjust to price changes. Businesses must anticipate shifts in purchasing behavior and adjust pricing or discount strategies accordingly.
Michael Stanisz: A key mistake we see is businesses solely focusing on cost analysis without considering market dynamics. If competitors shift their pricing, that affects your ability to pass costs along. It’s essential to take a 360-degree approach before making pricing decisions.
Communicating Price Increases Transparently
Colten Esser: Many businesses hesitate to increase prices, fearing customer backlash. How should they handle these conversations?
Michael Stanisz: Transparency is key. If you’re upfront about why prices are increasing—especially when tied to tariffs—customers are more likely to accept them. This is one of the easiest times to push pricing adjustments because customers understand tariffs are external forces beyond your control.
Avy Punwasee: A big mistake is trying to absorb costs entirely. If you’re silently eating a 20% cost increase, customers might later wonder why you were able to afford it in the first place. That opens the door to difficult negotiations down the road.
Strategic Pricing Adjustments: Beyond Just Raising Prices
Colten Esser: Aside from raising prices, are there other pricing strategies companies should consider?
Avy Punwasee: Absolutely. Businesses can explore:
- Bundling products to create perceived value.
- Restructuring discount strategies to maintain margins.
- Adjusting payment terms to offer flexibility while safeguarding revenue.
- Re-evaluating contracts to ensure long-term profitability.
Michael Stanisz: Another key strategy is understanding price sensitivity across different product segments. Businesses often spread price increases evenly across all products, but some are more price-sensitive than others. By strategically adjusting prices based on customer behavior and competitive dynamics, companies can optimize profitability without alienating customers.
The Role of Discounts and Promotions in a Tariff Environment
Colten Esser: How should businesses rethink discounts and promotions in light of tariff-related cost increases?
Michael Stanisz: One of the biggest mistakes businesses make is indiscriminately applying discounts. Any discount should be conditional—whether that means bundling additional purchases, committing to longer contracts, or participating in data-sharing programs. If you’re giving something away, you need to get something in return.
Avy Punwasee: In B2B industries, the challenge is even greater because pricing structures are often opaque, and contracts vary significantly. However, this is also an opportunity to clean up outdated discount structures that may no longer serve the business.
Should Companies Add a “Tariff Fee” on Invoices?
Colten Esser: Some companies are adding a “tariff fee” as a line item on invoices to improve cost transparency. Do you recommend this approach?
Avy Punwasee: While it may seem like a logical way to communicate the cost burden, it’s not ideal. Tariffs tend to become a permanent part of the cost structure, so instead of treating them as an add-on, it’s better to incorporate them into your base pricing.
Michael Stanisz: Adding a tariff surcharge now could become a long-term problem when tariffs remain in place for years. It’s better to adjust pricing holistically to avoid having a visible fee that customers may later challenge.
What About Businesses Not Directly Affected by Tariffs?
Colten Esser: Some companies assume tariffs won’t impact them because they don’t import goods. What’s your take on that?
Avy Punwasee: Even if you’re not directly affected, your customers might be. That means they will adjust their budgets, reallocate spending, and potentially reduce their demand for your products or services. Businesses that ignore these ripple effects risk being caught off guard.
Michael Stanisz: A great example is the software industry. While software companies don’t deal with tariffs directly, many of their clients are in manufacturing and logistics—industries deeply impacted by tariffs. If customers face higher costs, they may cut software budgets, renegotiate contracts, or delay purchases. No business operates in isolation, so it’s crucial to anticipate these downstream effects.
Final Thoughts: Preparing for the Future
Colten Esser: What’s your biggest piece of advice for businesses navigating pricing in a tariff-driven environment?
Michael Stanisz: Don’t be reactive—be proactive. Businesses that monitor competitor responses, analyze customer behavior, and adjust pricing strategies thoughtfully will be in a much stronger position than those that simply hope for the best.
Avy Punwasee: The key takeaway is that tariffs create lasting shifts in the market. Companies that embrace a strategic, data-driven pricing approach will not only survive but thrive in the long run.
Conclusion
Pricing strategies are more critical than ever in an uncertain trade environment. By understanding the financial, competitive, and customer implications of tariffs, businesses can develop smart, sustainable pricing models that protect profitability. The insights shared by Avy Punwasee and Michael Stanisz highlight the importance of proactive planning, transparency, and strategic execution.
For TEC Canada members and business leaders alike, now is the time to evaluate your pricing strategy and ensure you’re prepared for the evolving global trade landscape.
Summary of remarks by Tiff Macklem, Governor of the Bank of Canada
Mississauga Board of Trade & Oakville Chamber of Commerce
February 21, 2025 – Mississauga, Ontario
This summary highlights key insights from Governor Tiff Macklem’s speech on the economic implications of US tariffs, structural changes in trade, and the role of monetary policy in Canada’s economy.
Introduction
Good afternoon. It’s a pleasure to be here. I want to thank the Mississauga Board of Trade and the Oakville Chamber of Commerce for inviting me.
When I accepted this invitation months ago, my plan was to launch the renewal process for our monetary policy framework. This framework defines our goal of maintaining price stability over time, aiming for a 2% inflation target within a 1% to 3% range. We renew the framework every five years in agreement with the Government of Canada, ensuring that it remains the best approach for the future.
However, recent developments—particularly President Trump’s announcement of broad-based tariffs on Canadian exports—have introduced uncertainty that is already affecting our economy. If a protracted trade conflict unfolds, the consequences could be severe.
This speech will address key questions:
- What could this structural change look like?
- How would a prolonged trade conflict impact the Canadian economy in the short and long run?
- What role can monetary policy play?
- What actions can Canada take beyond monetary policy to mitigate the consequences?
The Benefits of Free Trade Between Canada and the United States
Free trade has historically benefited both Canada and the United States, improving efficiency, driving investment, and boosting productivity. Key milestones in Canada-US trade include:
- 1965 – The Auto Pact: Led to economies of scale and lower vehicle prices.
- 1988 – The Canada-US Free Trade Agreement: Increased Canadian manufacturing productivity by approximately 14%.
- 1994 – The North American Free Trade Agreement (NAFTA): Strengthened trade ties across North America.
- 2020 – USMCA (Updated NAFTA): Reinforced trade relationships among Canada, the US, and Mexico.
Today, three-quarters of Canada’s goods exports go to the United States, making Canada the top export destination for the US. Any significant increase in tariffs will reverse decades of economic progress.
What Structural Change Looks Like
Unlike the COVID-19 recession and recovery, a trade war could lead to long-term structural economic change. If tariffs remain high and prolonged:
- Economic output will not bounce back after the shock.
- The economy may regain its previous growth rate, but the absolute level of output will remain lower.
- A multi-sector, multi-country trade model suggests that tariffs could lead to a 2.5% permanent decline in economic output.
How Tariffs Hurt Economic Activity and Boost Inflation
Tariffs will impact Canada’s economy in three key areas:
1. Decline in Exports
- A 25% tariff on non-energy goods and a 10% tariff on energy will make Canadian exports more expensive, reducing US demand.
- A lower Canadian dollar will partially offset this but not enough to prevent an 8.5% drop in exports within a year.
2. Slower Consumer Spending and Investment
- Higher costs will shrink household incomes, leading to a 2% decline in consumer spending.
- Business investment will drop by nearly 12% due to higher import costs and lower profit margins.
3. Increased Inflation
- Tariffs will increase the cost of imported goods, including machinery, food, and consumer products.
- The Consumer Price Index (CPI) will rise, temporarily pushing inflation above 2%.
What Monetary Policy Can and Cannot Do
The Bank of Canada’s role is to manage inflation and economic stability, but monetary policy cannot offset the full impact of tariffs.
- Short-term role: The Bank can support demand by adjusting interest rates.
- Long-term limitations: Monetary policy cannot restore lost supply or production capacity—it can only smooth economic adjustment.
- Inflation control: The Bank must ensure that higher prices do not lead to permanently high inflation.
Strengthening Canada’s Economic Union
If Canada faces a prolonged trade war, we must counterbalance negative structural changes with positive economic reforms, including:
- Reducing interprovincial trade barriers to improve efficiency.
- Harmonizing provincial regulations to allow greater labor mobility.
- Streamlining regulatory approvals to reduce delays in business investments.
- Improving east-west transportation infrastructure to reduce reliance on US trade.
Higher productivity and internal trade efficiency could help offset some of the economic losses caused by tariffs.
Renewing Our Monetary Policy Framework
The global economy is shifting, requiring a reassessment of Canada’s monetary policy framework. Key issues include:
- Managing supply shocks: The traditional approach of “looking through” supply shocks may need revision.
- Measuring underlying inflation: Identifying the most reliable core inflation indicators in a volatile world.
- Housing market impacts: Understanding how monetary policy affects housing affordability and inflation.
The 2% inflation target has been successful for decades, and while the framework is under review, maintaining price stability remains a top priority.
Conclusion
Canada’s economy has stabilized post-pandemic, but new risks are emerging. A prolonged US trade conflict could lead to:
- Sharp declines in exports and investment
- Higher inflation despite weaker demand
- Lower long-term living standards
While monetary policy can help smooth the adjustment, Canada must focus on internal economic reforms to build resilience in a more uncertain global economy.
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While President Trump’s tariff announcement may seem abrupt, it stems from deeper underlying forces shaping Canadian-American trade relations. Explore the motivations behind the proposed tariffs and discover strategies for SMEs to mitigate risk.
The TEC Canada CEO Confidence Index provides a real-time pulse on the Canadian economy, delivering valuable insights into evolving business conditions and the confidence levels of SME leaders.