If U.S. President-elect Donald Trump follows through on a threat to impose a 25 per cent tariff on all Canadian imports, Ontario will likely see the brunt of the impact, a business professor at Carleton University says.
“It’s going to have an incredibly focused impact, a disproportionate and focused impact, on southern Ontario,” Ian Lee, an associate professor at the Sprott School of Business, told CP24.com earlier this week.
“Ontario is going to take a huge, huge hit.”
Trump vowed to impose these new taxes on all imports from Canada and Mexico when he is sworn into office in January.
The tariffs, he said, would be in place until the neighbouring countries help stem the flow of illegal migrants and drugs into the U.S.
Lee said if this comes to fruition, the first and most significant consequence would be on the Canadian dollar.
“The dollar is going to crash like a stone,” Lee said. “It will be a catastrophic decline.”
He said given that Canada imports a third of its GDP, every person will feel the effects of the declining dollar.
“Every last living, breathing Canadian is going to get hit because every time they buy something, it’s going to hit them.”
Ontario’s auto industry could see mass layoffs
The move, he added, would likely lead to layoffs across Ontario’s auto manufacturing sector.
A tariff of that magnitude, he said, would force U.S. companies that purchase auto parts from Ontario plants to immediately search for alternate suppliers.
“25 per cent will make those products from Canada uneconomic, uncompetitive… They will stop buying from Canada,” he said.
“So what will happen is that those (Ontario) companies, they will immediately put in emergency plans to lay off people.”
The impact of those layoffs in the country’s largest province, he said, would ripple throughout the Canadian economy.
“I cannot see how we wouldn’t be pushed into a recession,” Lee said.
Catherine Fortin LeFaivre, the vice-president of strategic policy and global partnerships at the Canadian Chamber of Commerce, said they are taking the threat “very seriously.”
“I think we’re all trying to assess what exactly this will look like and it is hard to tell if this is a tactic or if we are actually looking at 25 per cent tariffs,” she told CP24.com.
“But we do have to take it seriously.”
She said a recent report authored by the chamber’s business data lab found that a 10 per cent tariff would result in a productivity decrease of at least one per cent in Canada.
“We’re talking two, two-and-a-half times that,” she said.
“So you know we’re headed, if this were to be the case, in a recession state.”
She said the impact will be felt on both sides of the border.
“In terms of Ontario, we know that Ontario is a top export destination for 17 states,” she said.
“It will not only have consequences for consumers and businesses in Ontario, but also for consumers and businesses in the U.S. who rely very much on Ontario.”
She said all options need to be considered to mitigate the situation.
“I think we really need to look seriously at what we can control,” she noted.
In order to prevent Trump’s threat from becoming a reality, Lee said political leaders need to avoid a “hot-headed” response and be “strategic.”
“Open up dialogues and find out what does Trump want from us? I’ve been following him for a long time and he has many times talked about our protected industries… I’m talking about dairy. I’m talking about telecom,” he said.
Premier Doug Ford should play ‘key role’
Lee said it will be important for Ontario Premier Doug Ford to play a key role in any negotiations with the Trump administration.
“He is the premier of the largest and most powerful and most important province in Canada,” Lee said.
“I think that Premier Ford is going to be respected by the people around Trump and Trump because they’re more simpatico ideologically… They’re pro business.”
Speaking to reporters last week, Ford noted that Ontario does approximately $500 billion in trade with the U.S. each year.
The premier called the proposed tariff “the biggest threat we’ve ever received from our closest friends and ally.”
“It’s like a family member stabbing you right in the heart,” Ford said.
The prime minister met with Canada’s premiers, including Ford, during an emergency first ministers’ meeting on Wednesday to discuss Trump’s threat.
“I think that Premier Ford… it’s absolutely essential that he plays a key role, literally side by side with Prime Minister Trudeau at any negotiations,” Lee said.
“They’ve got to put aside any differences they may have… they have to set those aside for the greater good of Canada.”
With files from The Canadian Press