What would retaliatory tariffs mean for Canada?

In response to Trump's fixation on the US trade deficit with Canada and imposed tariffs, both Prime Minister Justin Trudeau and Conservative Leader Pierre Poilievre have called for placing similar levies on the US. 

“We will respond dollar for dollar”, said Poilievre. “We will make sure Americans know they will be paying the tariffs they impose on us.”

Trudeau has suggested that the retaliatory tariffs would be placed on American beer, wine, food and appliances as well as some critical minerals.

It is clear that Canada's leaders are willing to respond forcefully to threats. Though this may be good politics, it could have catastrophic consequences for Canada's already bleak economy. The Canadian dollar is in steady decline, and has broadly fallen back to levels last seen during the early days of the pandemic. 

According to FHN Financial, Canada exports around $421 billion in goods and services to the US, which is about 20% of its economy. Thereby, tariffs could cause economic losses of more than 1% of gross domestic product, and as much as 5% between lost profts and sales (FHN, 2025). "In other words, something between a severe recession and a catastrophic one," (FHN, 2025). 

And this is before the imposition of any retaliatory tariffs by Canada, that would likely spark inflation and slow spending (Bloomburg, 2025). 

Over the last 15 years, Canada's per capita GDP in US dollars has, while the measure has surged for the US. "As recently as 2012, Canada’s GDP per capita was higher than that of the US, or $52,670 in US dollars versus $51,784. Fast forward to 2023, and Canada’s GDP per capital has barely budged, coming in at $53,431, while soaring to $82,769 in the US," (Bloomburg, 2025).

According to the Organisation for Economic Co-Operation and Development, Canada has fallen from the 6th most production economy in 1970, to 18th as of 2022. Structural issues have restrained Canada's economy, and as a result, their citizens. 

"The only realistic way for the US to eliminate its trade deficit would be to work with Canada to implement policies that spur its economy in ways that lead to stronger productivity and faster wage growth" (Bloomburg, 2025), but this is an unlikely reality. On the bright side however, Trump's tariffs may force Canada to finally mend structural economic weaknesses. 

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