On November 25, President-elect Donald Trump announced his intention of placing an across-the-board 25% import tariff on Canada and Mexico on January 20th via Executive Order. It remains unclear whether the incoming U.S. Administration is committed to following through on this exact measure or if the announcements are intended (as many believe) to be a negotiating tool aimed at addressing irritants including concerns regarding border security.
HRAI is monitoring these developments and is preparing to engage in policy conversations with the federal government on an appropriate response should this promise turn into a reality.
In the meantime, the Canadian Chamber of Commerce (of which HRAI is a member) is assessing the implications that the tariff announcement will have for the 2026 CUSMA review. For reference, you can find the Chamber’s October 31 submission to the government’s CUSMA consultation here.
In a recent communiqué, Chamber representatives drew attention to the following preparatory actions:
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The Chamber of Commerce is interested in hearing more about tangible cases of how the tariff might negatively impact specific industries. They are seeking insights that will help to better understand how the tariff may affect companies and potential steps to mitigate these risks.
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The Chamber’s Business Data Lab is developing an online dashboard tool on Canada-US trade which will help to quickly and easily quantify the importance of the bilateral trading relationship for the U.S.
On November 26th, Chamber President and CEO, Candace Laing, issued the following statement in response to the President-elect’s tariff announcement:
Being America’s “nice neighbour” won’t get us anywhere in this situation. President-elect Trump’s intention to impose 25% tariffs signals that the U.S.-Canada trade relationship is no longer about mutual benefit. To him, it’s about winners and losers—with Canada on the losing end. We’re facing a significant shift in the relationship between long-standing allies. Canada’s signature approach needs to evolve: we must be prepared to take a couple of punches if we’re going to stake out our position. It’s time to trade “sorry” for “sorry, not sorry.”
A similar statement was issued by the Canadian American Business Council (CABC), an ally that has for more than a decade advocated for open borders and aided in the creation of the Regulatory Cooperation Council (RCC) which has led to greater harmonization between Canada and the US on efficiency regulations. CABC CEO Beth Burke said
We strongly oppose the incoming administration’s proposed 25% tariff against Canada and Mexico. This action, if pursued, would undermine the principle of the USMCA, harm businesses on both sides of the border and erode the economic and geopolitical strength of North America.
We’ve learned previously that retaliation is inevitable, and countermeasures can target sensitive industries, exacerbating the economic impact and creating uncertainty for businesses. The only way for Canada and the United States to move forward is through dialogue within the framework of the USMCA that President Trump and Prime Minister Trudeau negotiated and signed into force.
We call on the President-elect to prioritize collaboration and uphold the principles of the USMCA, ensuring North America remains a global leader in trade and innovation.
HRAI and allied associations like CIPH and AHRI have supported this positioning.
Additional preliminary reactions and comments that have been issued by the Chamber:
SUPPLEMENT: Economic Impacts of Tariffs
In a recent report on Canada-U.S. trade by the Canadian Chamber’s Business Data Lab, Trevor Tombe (Professor, Department of Economics and the School of Public Policy at the University of Calgary) modelled the impacts of a 10% across-the-board U.S. tariff on imports. The estimated impacts of a 25% U.S. import tariff are:
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In the case that there is full trade retaliation in response to the 25% tariffs, this would shrink Canada’s GDP by 2.6%, which translates to an economic cost of roughly CAD $78 billion, costing Canadians CAD $1900 per person annually. To the U.S., this scenario would shrink GDP by 1.6%, which translates to an economic cost of roughly USD $467 billion, costing Americans USD $1300 per person annually.
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The most heavily impacted sectors would be energy, autos, mining, pharmaceuticals, chemical and forestry products. See below estimated changes in Canadian exports to the U.S. by sector that would result from a 25% across-the-board U.S. import tariff. If no exemptions were granted, this policy could push Canada’s economy into recession by the middle of 2025.
Economic reactions to the tariff announcement in the near term:
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Financial markets are the fastest to integrate new information. In the near term, we expect exchange rate reactions, featuring a stronger U.S. dollar (which is viewed as a “safe haven asset” in times of uncertainty), and similarly a weaker Canadian dollar (which other things equal, makes Canadian products cheaper and encourages our exports).
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Perhaps counterintuitively, over the next few months, we expect a surge in U.S. imports from Canada and Mexico, as Americans build up inventories and make their purchases ahead of any potential tariffs. We saw this same behaviour last time with a roughly 20% increase in Canadian exports of steel and aluminum products to the U.S before tariffs came in. Over the 13 months those tariffs were in place, trade fell by a cumulative 16% overall — and more than 40% by the end relative to pre-tariff levels — representing a loss of roughly $2.4 billion in Canadian exports in these two products alone.
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Another key impact will be a dramatic increase in U.S. trade policy uncertainty, as we witnessed in Trump’s first term, when he imposed sweeping tariffs on China, threatened massive auto tariffs and even threatened to walk away from NAFTA. The only other time of significant trade policy uncertainty was in the early 1990s around the original negotiations that expanded the Canada-U.S. free trade agreement to include Mexico as part of NAFTA. The result of this elevated uncertainty will likely be investment hesitation in Canada, as businesses wait on the sidelines, seeking more clarity on the rules of trade, before making big bets on large projects.
