Posthaste: Tariff 'double whammy' headed straight for these Canadian businesses, report says

Canadian sectors already reeling from United States tariffs now have to contend with a hit from Canadian counter-levies, possibly resulting in a “double tariff shock,” says a new report by Desjardins Group.

“Our analysis confirms that several manufacturing sectors will face a double shock,” Florence Jean-Jacobs, principal economist at Desjardins, said in the report on Sept. 8, the day Canadian counter-tariffs on $28-billion worth of the U.S. imports came into effect.

The measures were in response to additional U.S. duties targeting a similar dollar value of exports from Canada that were imposed on Aug. 22, after trade talks between the two countries broke down.

Canada’s manufacturing sector, already targeted by earlier and ongoing U.S. tariffs on autos, steel and aluminum and pulp and paper, continues to be the most vulnerable to the escalating trade war.

Several new sub-industries have been affected by the new 50 per cent U.S. tariffs under Section 338, including chemicals, machinery, electrical, computer and electronic products, plastics and rubber, textiles and alcoholic beverages.

The report said electrical, equipment, appliances and components worth $12.8 billion in annual exports to the U.S., textiles, clothing and related products worth $3.3 billion and computer and electronic products worth $11.5 billion are predicted to take a hit on both tariff fronts.

Jean-Jacobs said the tariff “double whammy” will also affect plastics and rubber products worth $18.1 billion, furniture and related products worth $4.8 billion and alcoholic beverages worth $1.3 billion, though the latter sector is mostly vulnerable due to glass and metal containers it needs.

The list of affected products in other sectors that had previously been targeted by the U.S. is expanded under Sector 338 as well. For example, plywood, more machinery and jewelry and sporting goods — such as hockey sticks — were added to miscellaneous manufacturing.

On the Canadian side, the counter-tariffs were aimed at U.S. exports, including steel and aluminum, dairy products, household appliances, agricultural equipment, pulp and paper, plastics and electronics.

Jean-Jacobs said “very few” food items fell under the retaliatory tariffs, though some products will be hit, including whey powder, granulated milk and cream, honey and molasses, as well as mixes and doughs used in bakery production. But she said businesses ought to be able to source those products from domestic producers.

It won’t be quite so easy for others, however.

“For certain imports, the tariffs that take effect today will have more damaging consequences, because they apply to inputs that are widely used by Canadian businesses,” Jean-Jacobs said.

The wholesale and retail trade could also suffer as consumers shy away from items on the shelves sporting price increases of 25 per cent to 50 per cent, which could force companies to cut back on a wide range of U.S. products, such as personal and household goods, machinery and equipment and various consumer goods like fabrics, clothing, jewelry, sporting goods and beauty products.