What Trump’s 25% tariff could mean for Canada’s economy, currency | Canada Tonight

all right Ian Lee Joins me now associate professor Sprout School of Business at Carlton University Ian it's good to see you again my pleasure Angie tell me where the wheels are turning on this in your mind here um with regards to this announcement coming from Donald Trump well beyond the fact that it looks like the immigration minister of Canada Mark Miller is now going to be reporting to president-elect Trump setting that aside um the consequences are going to be devastating for Canada uh the US is are largest trading partner uh roughly 67 70% of the

totality of our trade uh is with the United States um two-thirds of our GDP is dependent on trade uh I looked up the um the the chief Economist of global Affairs Canada and statcan data and they say that two it it estimates that just under two million jobs in Canada are dependent on exports to the United States that's direct and indirect uh jobs I mean this is catastrophic I mean let's let's be very clear there's no way of sugar coating this this is just completely bad news there's no redeeming good news here for Canada and

we're certainly getting a lot of reaction coming uh from many people we've heard from jug me sing the Quebec Premier Fran Lago uh putting this out on X saying This Promise by president-elect Donald Trump poses an enormous risk to the Quebec and Canadian economies who must do everything to avoid everything possible exy to avoid 25% tariffs on all product products exported to to the United States border Integrity must be the priority of the federal government are for the full cooperation of the Quebec government to prime minister Trudeau um The Border as you know Ian they

he we we've heard that from Donald Trump and we've heard that from from other uh analysts as well that is really key in all of this but talk to us about that border from a business perspective as well how critical obviously of course it is and with this this now hanging over us as again we don't know what's going to happen but it certainly is a shock as you point out here with this hanging over us what what what will this mean um as we're sort of looking on that export of goods and services back

and forth well I I'll just deal with that in one minute but let me just go big picture for a moment I mean this is an absolute repudiation of kma of the NAFTA agreement which we now call kma I mean if anything I would think that this is going to accelerate and bring forward those negotiations from 2026 to the moment Donald Trump enters office because in Jan uh January 20th I believe uh because as I said this is an abreg this is a because this is prohibited under kma the second Point that's going to have

on us is I would suspect that overnight and tomorrow morning we're going to see the Canadian dollar tank uh go down depreciate and that of course again because we import so much and Export so much it will if the canar goes down significantly that's going to drive up the cost of imported goods and we import a lot of you know fruit and vegetables of course in the winter months so that'll put pressure on on the cost of living but in terms of the Border this couldn't come at a worst time because we've had all these

strikes in Canada you know Port of Vancouver Port of Montreal the CN rail um uh CP and and we were already uh shall we say a not very reliable partner and then Along Comes This which could uh uh which could almost close the border u in terms of the movement of goods and services and there's a staggering amount of of uh Goods that cross those borders uh those bridges uh every day upwards of2 billion a day so again the the impact on the Canadian economy on jobs on on the Canadian currency uh of course on

Ottawa and the premier uh is going to be uh just un incalculable Beyond just the mere the sheer economic negative economic impact this is going to have on our economy remember we're only one tenth the size of the us we're two and a half trillion they're 25 trillion you talked about the cost of living you mentioned that briefly Ian but let's pull away the layers on that as well because the concern is any additional tax whether we're talking about 25% or anything will eventually spill over onto the consumer oh uh for sure because um the

um it through I think the immediate impact will be through the dollar that is to say the markets are going to say look this is really bad for Canada they're going to drive down the value of the Canadian dollar Vis the US dollar which will increase the cost of our Imports we import about a third of GDP that's about a trillion dollars that's clearly going to push prices up but it's also if these tariffs did go through it's going to cause unemployment be uh in Canada because those companies that are exporting those many many jobs

in those companies that are exporting to the United States will be laying people off because they'll be losing their export markets almost overnight and so I mean when you when you lose a market of that magnitude and you're an exporter in Southern Ontario for example the Auto industry with Auto Parts um this is going to put almost put you out of business and and so again this isn't Theory this is this is really catastrophic which is why I think that we're going to need all hands on deck the premier the pre uh prime minister and

and and possibly offering to renegotiate kma now move that timetable up of course we want him to reverse this but we're going to have to offer something more than oh my goodness this is going to hurt Canadians a lot I mean Trump already understands that that's why he's threatening us with this what do you think the Bank of Canada is watching right now could potentially respond to as we constantly sort of look for that uh response that guidance here but from that perspective here what do you uh what do you think um they may is

issue soothing words but for those who are saying well this is clearly time for a bigger rate cut well all that's going to do is accelerate the depreciation of the Canadian dollar because there's already a gap between the central bank R interest rate in the states and in and in Canada that's been partially contributing to the depreciation of the Canadian dollar if they were to say you know oh well this is a real crisis we're going to drive down uh interest rates by another half a point that will make the decline of the dollar even

worse and that will cause imported goods to cost even more which will push up inflation even more so I don't I cannot imagine that the the central bank would be saying G whiz let's going and cut interest rates by a half a point or more in light of this it would just be so again it would be counterproductive to the Canadian economy I think the solution is more going to be political rather than for example Central Bank intervention Before I Let You Go in last question to you here what are you watching for now the

the Canadian government is clearly going to respond the 10 Premier are clearly going to respond they'll probably put together some emergency task force the question is what is Trump demanding concretely what is he demanding of us that we can potentially offer to uh have him resend this commitment for the Staggering increase in the tariffs he has I mean he SP it said it in very general terms I mean uh illegal immigration and illegal drugs that's a very generic uh generalization I mean what specifically concretely does he want Canada to to promise or commit to uh

for him to uh uh cancel his uh promise to raise tariffs so that's what I'll be watching for tomorrow morning Ian good to have you on this thank you so much Ian Le associate professor Sprout School of Business at Carlton University thanks again Ian [Music]