Canada is preparing to respond decisively to the potential economic impact of US President-elect Donald Trump's proposed tariffs. The tariffs, which could be as high as 25% on Canadian goods, threaten to significantly affect both the Canadian and US economies. Canadian Prime Minister Justin Trudeau has warned that "nothing is off the table" in response, indicating a willingness to consider various countermeasures.
If the tariffs come into effect, analysts predict a significant economic pinch on both sides of the border. The US GDP could shrink by between 0.9% to 1.6%, while Canada's GDP might take a more severe hit, with estimates ranging from a 1.8% to 3.38% drop and potentially as high as 2.6% to 5.6%. This is particularly concerning given that approximately 75% of Canadian exports are destined for the US market.
The proposed tariffs could lead to extensive job losses across Canada. Ontario Premier Doug Ford has suggested that up to 500,000 jobs could be at risk in his province alone. Similarly, financial forecasts indicate that Alberta might see up to 50,000 job losses. Despite attending a virtual meeting with other premiers, Alberta Premier Danielle Smith did not sign a joint statement, emphasizing her stance: "We will take whatever actions are needed to protect the livelihoods of Albertans from such destructive federal policies."
The energy sector plays a crucial role in this economic equation. Approximately 40% of crude oil processed in US refineries originates from Canada, making Canada a crucial energy supplier. Newfoundland Premier Andrew Furey has likened this strategic advantage to a queen in chess, stating, "I see energy as Canada's queen in this game of chess." He further commented on Canada's strategy with the metaphor: "We don't need to expose our queen too early."
The potential tariffs are part of President-elect Trump's broader strategy to push Canada towards stricter measures against illegal immigration and drug smuggling into the US. However, Canadian officials argue that these tariffs could backfire by undermining the US economy, increasing inflation for American consumers, and deterring investment.
Trudeau and other provincial leaders, including those from Ontario and Quebec, have expressed their readiness to consider imposing counter tariffs on energy or even halting energy exports to the US if necessary. "We're all united in that we have to act in a robust way," Trudeau stated, underscoring Canada's resolve.
In preparation for possible tensions at the border, Ottawa has committed to implementing C$1.3bn ($900m; £700m) in new security measures along its nearly 9,000km-long (6,000-mile) border with the US. This move aims to bolster national security amidst the looming trade conflict.
Drew Fagan, a former senior government official, highlighted the complexity of dealing with the current US administration's unpredictable approach: "It's hard to be strategic with an administration like this whose thinking is often a little bit more off the cuff."
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