How will Trump's tariffs affect Canadian businesses?

**Gideon Long** (0:01)
Donald Trump hits Canada with 50% tariffs. It's World Business Express from the BBC World Service. I'm Gideon Long. Plus another blow for Paramount in its bid to take over Warner Brothers. And we look at the challenges facing clothes manufacturers in Bangladesh.
Donald Trump's announced a 50% tariff on a whole load of goods coming from Canada, including wine, cement and even hockey sticks. As you can imagine, it's not gone down well in Canada. Here's Doug Ford, the premier of the province of Ontario.

**Doug Ford** (0:39)
It's disappointing to say the least. Maybe if you got rid of the tariffs on softwood lumber, it might make a difference. I got to remind President Trump that 33% of the lumber, and we have better quality lumber here in Canada, comes from Canada to build their homes. And he's wondering why the housing costs of building is going up, because he's putting tariffs on his number one trading partner.

**Gideon Long** (0:59)
Well, Stuart Bergman is chief economist at Export Development Canada. He told me that while he didn't like the move, it wouldn't hit Canada's most important industries.

**Stuart Bergman** (1:07)
At the macro level, the impact may not actually be as striking as the headline suggests. We're looking at about $20 billion US dollars worth of exports or about 5% what Canada shipped to the United States last year. The sectors that really drive Canada's overall export economies, I'm thinking about sectors like energy, of course potash, critical minerals, many metals. The auto sector were actually explicitly excluded from this round. That said, the macro impact often obscure the disproportionate impacts borne by certain sectors or segments of our economy, including many small and medium size exporters in areas like consumer goods, food processing, some nice manufacturers. In fact, the industries that were chosen are among the Canadian industries with the highest US market concentration where business models are really built around US customers and where market diversification is quite difficult in the short run. In fact, in many cases, we're looking at like some 70 to even 95 percent of export sales going to the United States. And that makes the microeconomic impacts potentially quite a bit more severe, even if the aggregate Canadian GDP effect is fairly modest.

**Gideon Long** (2:12)
Stuart Bergman there. Well, the US says it's imposing these tariffs in retaliation for Canada's unfair treatment of American goods, including dairy, alcohol and cars. It says Canada has hit the US car industry with tariffs and quotas, which it hasn't applied to other countries. And it says Canadians force US auto companies to invest in Canada. I spoke to Lukas Malinowski, president and CEO of Global Automakers of Canada. I asked if that was true.

**Lukas Malinowski** (2:39)
Yes and no.
So it's important to remember that Canada did not impose tariffs on American built vehicles willy nilly. That was a direct response to the US imposing 25% tariffs on vehicles manufacturing Canada, as well as Mexico coming into the US in violation of the existing trade agreement between the three countries. So as a response, Canada also applied counter tariffs on US made vehicles coming into Canada, which is not insignificant. Canada is actually the largest export market for US made vehicles. So it's important to remember the facts and that Canada did not move unilaterally. And while imports from other countries that Canada has free trade agreements are still coming in, tariff free, that's Canada simply recognizing its existing agreements with other trading partners, which the US is not doing in this instance.

**Gideon Long** (3:26)
And Lucas, this is a complicated supply chain. On average, how often does a car made in North America cross that US Canadian border before it's a finished product ready for sale?

**Lukas Malinowski** (3:35)
On average, you can have parts crossing back and forth between the border seven to 10 times before you have a finished vehicle. And it's really helped North American auto manufacturing remain competitive in a global market.

**Gideon Long** (3:50)
Lucas Malinowski from Global Automakers of Canada. I'm joined by Fiona Sincotta, Senior Market Analyst at Stonex in London. Fiona, we haven't talked too much about US tariffs recently, but it feels like they're coming back into view. 25% on Brazil last week, 50% on Canada this week. Why?

**Fiona Sincotta** (4:09)
Yes, this does feel like a case of deja vu. So, I mean, if we just go back a little bit first, Trump actually initially unleashed tariffs globally at the start of his term in early 2025, and that's when it hit Canada, one of its closest trading sort of partners with 25% tariffs. Canada retaliated with counter tariffs. Then we had the US Supreme Court ruling earlier this year that those Trump's tariffs were illegally enacted. So we saw a lowering of tariffs to 10% for 150 days, which is about to run out this month. In the meantime, Trump has also been seeking other legal avenues to apply tariffs. And this is why we have the threat of a revival of the trade war.