Report: Canadian Economy Could See 3% Impact from Sweeping Tariffs, Despite Exemptions

A recent report from CIBC suggests that extensive tariffs imposed by the U.S. could have a significant impact on the Canadian economy, potentially reducing it by up to 3.25 percent, even with potential exemptions for the oil and gas sector.

The analysis, released on Tuesday, explores four different scenarios in which President Donald Trump imposes new taxes on Canadian imports, ranging from 10 to 20 percent, with the possibility of exceptions for critical industries.

During a press briefing on Monday, Trump mentioned the idea of implementing 25 percent tariffs on Canada and Mexico starting on February 1.

Prime Minister Justin Trudeau has stated that Canada will respond and is considering all available options.

According to the CIBC report, even with a 20 percent tariff excluding commodities (which make up 46 percent of Canadian exports to the U.S.), the GDP could still suffer a 3.25 percent decrease.

In a more conservative scenario with a 10 percent tariff excluding both commodities and the auto industry, the impact on the Canadian economy would be approximately 1.35 percent, exempting about 60 percent of Canadian exports.

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The report also suggests that targeting sectors like oil and gas and the auto industry, which represent a significant portion of Canadian exports to the U.S., could have negative consequences for American jobs, energy initiatives, and inflation.

According to the report, a sweeping 25 percent tariff is unlikely to become a reality in the near future due to implementation challenges, negotiation hurdles, and the risk of retaliation.

Despite previous statements from Trump about imposing tariffs on Canada, he has instead opted to review alleged unfair trade practices.