Sweeping tariffs could be 3% hit to Canadian economy, even with carve-outs: report

President Donald Trump attends the national prayer service at the Washington National Cathedral, Tuesday, Jan. 21, 2025, in Washington. (AP Photo/Evan Vucci)

TORONTO — A CIBC report says sweeping tariffs imposed by the U.S. could cost the Canadian economy as much as 3.25 per cent, even factoring in possible exemptions for the oil and gas sector.

An analysis published Tuesday examined four potential scenarios in which U.S. President Donald Trump slaps new taxes on goods imported from Canada, ranging from 10 to 20 per cent and with possible carve-outs for key industries.

Speaking with reporters on Monday evening, Trump said he’s thinking about hitting Canada and Mexico with 25 per cent tariffs on Feb. 1. Prime Minister Justin Trudeau has said Canada would respond and that “everything is on the table.”

The CIBC report says a 20 per cent tariff that excludes commodities — which make up almost half of Canadian exports to the U.S. — would still result in a GDP hit of 3.25 per cent.

Under a more conservative scenario where only a 10 per cent tariff is applied and excludes both commodities and the auto sector, the impact to the Canadian economy would be around 1.35 per cent.

The report suggests the Trump administration might not want to tax those sectors, which rely heavily on close integration with Canadian counterparts, as doing so “would come at a key cost to American jobs, contradict Trump’s cheap energy initiatives, and materially increase inflation.”

This report by The Canadian Press was first published Jan. 21, 2025