Some Canadians are bracing for potential pocketbook pain, as economists expect a U.S.-Canada trade war will have a ripple effect on both countries.
As Trump launched the tariffs, Americans will be hit first with higher prices because U.S. businesses importing Canadian goods would pay the tariffs and may pass on the extra costs to consumers, economist Tu Nguyen, who works for accounting firm RSM Canada in Toronto, told CTVNews.ca in a video interview on Feb. 27.
At the same time, Canadians will feel the sting later for certain items produced through the integrated Canada-U.S. supply chain, while a lower Canadian dollar may make imports of U.S. products a bit pricier, she added.
“A lot of goods that are produced in North America, the U.S., and Canada and Mexico are not entirely produced in one country,” Nguyen said, using the example of certain car parts that are produced in the U.S. and Canada. “So even when there’s a tariff only from one side, the end result might be higher prices for all consumers.”
Some food and beverages that you find in the grocery store could be among the items affected by U.S. tariffs alone, said Samuel Roscoe, a lecturer in operations and supply chain management at the University of British Columbia Sauder School of Business in Vancouver, in a video interview with CTVNews.ca on Feb. 27.
Canada exports raw materials and resources, including wheat, pork and canola, to the U.S., Roscoe said, which American firms then use in products such as bread, baked goods, processed meats, salad dressing and canola oil before shipping them to Canada where they are sold.
Similarly, Canadians could pay more for vehicles if Trump follows through with slapping steel and aluminum tariffs on Canada, which Trump said would take effect March 12. “The Canadian consumer is sort of at the mercy of a lot of these tariffs and tariff threats,” said Roscoe, whose expertise includes tariffs, imports and exports, and global supply chains.
“Some industries have very, very slim margins, and they have to pass on those increases to customers because if they don’t, then they will lose money and eventually go out of business.”
What could increase in price first?
Experts say it’s not clear when consumers would see price hikes or how long the tariffs would last.
Nguyen said it would take longer for consumers to see price increases for “non-perishable and durable” products such as cars and appliances since businesses will likely have inventory in stock.
With Trump’s tariffs in effect, Canada’s retaliatory tariffs are expected to raise prices for all targeted American products imported into Canada as well, Nguyen said.
The first items to see price increases will be food items such as peanut butter, fruits and vegetables, meat and dairy, which were included in the Canadian government’s list of American products that would be targeted by the retaliatory tariffs, Nguyen said.
With those products expected to cost more, she said it makes sense for Canadians to avoid buying them.
Nguyen expects the price hikes to be “a lot less” than the tariffs themselves, though she said it is hard to estimate the financial impact on consumers.
With the 10 per cent tariffs on energy imports, Nguyen said Canadians may eventually see a “slight increase” in gasoline prices since Canada exports crude oil to the U.S. and imports gasoline.
What can Canadians do?
With many Canadians worried about the tariffs, Nguyen suggests a way they can prepare for the expected financial hit.
“I think the preparation perhaps comes more from just having enough savings and strengthening the household budgets rather than stockpiling because it’s very difficult to see ahead of time which items would be directly impacted and which will be the most impacted,” she said.
Buying Canadian when feasible is also a good option, she said.
The impact of tariffs goes beyond the higher price tags and may lead to layoffs in certain industries. “If there’s a disruption in the supply chain, it also means that there’s a disruption in the production side, which can also mean that there will be a higher unemployment because there’s less demand for products,” said Marco Bijvank, associate professor of operations and supply chain management in the Haskayne School of Business at the University of Calgary, in a video interview with CTVNews.ca on Feb. 27.
Many American firms may try to find non-Canadian suppliers to avoid getting dinged financially, so affected Canadian businesses could raise prices to make up for lost revenue from the U.S. market.
Meanwhile, Bijvank doesn’t recommend stocking up on items because he says it would disrupt the supply chain.
…Source: ctvnews.ca/
