Following the return of Canadian negotiators and the imposition of 50% U.S. tariffs, the Canadian business community is evaluating the potential impact of these new levies.
Various business leaders specializing in exports such as plywood and wine are anticipating severe consequences due to the tariffs, stating that the high rates could effectively sever ties with the United States.
What remains uncertain is the extent of the blow to the overall economy, the sectors most vulnerable, and the implications for Canadian employment. Here is a breakdown of the key aspects.
Projected GDP Impact: BMO Analysis
The newly enforced 50% tariffs encompass a range of products amounting to about $28 billion in Canadian exports to the U.S.
Although this figure represents only approximately 5% of Canada’s total exports to the U.S., BMO’s senior economist, Robert Kavcic, estimates that these duties could potentially reduce Canada’s GDP growth by half a percentage point. This projection is partly due to businesses becoming cautious about making new investments to stimulate economic growth under the new tariff structure.
The timing of these tariffs is unfortunate as they coincide with a period where Canadian growth was showing signs of improvement after a sluggish start to the year.
Impact on Specific Industries
While the overall impact may appear modest on a national scale, certain sectors concentrated with tariffs are expected to bear the brunt of the consequences.
Although $28 billion is deemed manageable, Kavcic highlighted the potential devastation for small to medium-sized businesses in industries facing 50% tariffs, where their access to the U.S. market could effectively be cut off.
An analysis by CBC of export data from the United States International Trade Commission reveals that electronics and electrical equipment manufacturers will be most severely affected by the tariffs. In 2025, Canada exported over $4 billion worth of electronic equipment subject to these tariffs.
Following electronics, plastics rank second with $3 billion in exports, while furniture, bedding, and lighting stand close behind with $2.5 billion. Industrial machinery and paper products occupy the fourth and fifth positions.
Most manufacturing of these electronic products, plastics, and furniture occurs in Ontario and Quebec, making these provinces highly vulnerable to the new tariffs. Additionally, British Columbia is significantly impacted due to its exposure to paper and wood tariffs, with newly tariffed items representing over 13% of the province’s total exports to the U.S., the highest rate among all provinces.
Disproportionate Impact on Small Businesses
Aside from major manufacturing sectors, the newly tariffed items include a variety of consumer products like honey, candles, and hockey sticks.
Kavcic noted that these products are likely exported by smaller Canadian businesses and could easily be replaced with American alternatives. This could have a significant impact on these smaller players, especially those with limited financial reserves to navigate through challenging times.
According to the Canadian Federation of Independent Business (CFIB), 40% of its exporting members are producing items affected by the tariffs, with 35% anticipating a revenue decline of at least 50% and 78% believing their products will become uncompetitive in the U.S. market.
