Trade War Impact: Canadians Brace for Rising Costs

Canadians are facing the harsh reality of a prolonged trade dispute, with analysts warning of imminent price hikes on a wide array of consumer goods.The escalating tensions, marked by tariffs and retaliatory measures, threaten to squeeze household budgets and reshape the economic landscape.

Immediate Price Increases Expected

Experts predict that the impact will be swift and far-reaching. “We will see prices across the board going up,” warns Andreas Schotter, a professor of business at Western University. he elaborates, “I could imagine that on certain products you will see over the next few weeks, or even right now, an increase in prices.”

• Food Prices: Adelphe Ekponon, an assistant professor of finance at the University of Ottawa, suggests food prices may be the first to spike due to the perishable nature of these goods.
• Wider Impact: Eventually, according to Ekponon, “everything will be impacted.” This extends beyond groceries to encompass a broad spectrum of consumer products.

Tariffs and Retaliation: A Timeline

The current situation stems from actions taken by both the U.S. and Canada:

• U.S. Tariffs: The U.S. imposed 25% levies on Canadian and Mexican imports, along with a 10% tariff on Canadian energy.These tariffs were enacted following long-standing threats and escalating trade tensions.
• Canadian Retaliation: In response, Canada implemented 25% tariffs on $30 billion worth of U.S.goods. Furthermore, tariffs on another $125 billion worth of imports are slated to be applied after a three-week consultation period.

Consumer impact: Groceries to vehicles

Economist Tu Nguyen succinctly sums up the potential consequences for Canadian households: a trade war “means an increase in prices of multiple consumer goods, including groceries, appliances and especially vehicles.”

Beyond higher prices, Canadians should also anticipate a reduced selection of available goods as the flow of U.S.products slows down.

Specific goods targeted by Canadian counter-tariffs include:

• Meat and dairy products
• Fruits and vegetables
• Plastic building materials
• Various clothing items
• Lumber and other wood products
• Kitchen appliances

Inflation and Economic Concerns

The magnitude of these price increases remains uncertain, hinging on how businesses choose to absorb the added costs. Options include reducing production expenses, cutting jobs, or diminishing profit margins, according to Ekponon.

Though, the overall impact on inflation could be significant. Ekponon warns that the trade war could push overall inflation up by 0.5% to 1%, “which is huge.”

Beyond the Supermarket: Electronics, Liquor, and Autos

The price increases won’t be confined to grocery stores. According to Andreas Schotter, expect to see higher costs for electronics, computers, and other consumer products that are either shipped through or originate from the U.S.

• Liquor: The price of alcoholic beverages imported from the U.S. is also set to climb, possibly leading to higher prices at restaurants and bars. “Which is unluckily also detrimental,” notes Schotter.
• Automobiles: The auto industry is particularly vulnerable, according to Peter Morrow, associate professor of economics at the University of Toronto’s Munk school of Global Affairs and public Policy. He calls it the “poster child” for how tariffs effect goods that cross borders multiple times during production.

The Auto Industry’s Predicament

Morrow illustrates the auto industry’s plight with a specific example: brake pads manufactured in Canada and shipped to the U.S. for installation in a car would be subject to a 25% tariff. if that car is then re-imported into Canada and is subject to retaliatory tariffs, the tariff applies to the entire value of the car, including the brake pads. This creates a “double-counting” effect, where “every time a good crosses the border it’s going to be hit with a tariff.”

Currency Exchange Rates: A Critical Factor

Currency exchange rates also play a vital role in determining prices. “What we also see is not just the tariff, it’s also the currency. Our dollar is dropping like a rock right now,” observes Schotter.

Morrow explains that a decline in demand for Canadian dollars leads to a decrease in its value. “And basically anything that you import is going to become more expensive nonetheless of if there’s a tariff or not.” In 2025,this could cause the prices of goods to increase.

Navigating the Trade War: Strategies for Consumers

While the trade war presents challenges, consumers can take steps to mitigate its impact. Here are some strategies to consider:

• Shop Smart: Compare prices across different retailers and look for sales or discounts on essential items.
• Buy Local: Support canadian businesses and reduce reliance on imported goods.
• Delay Non-Essential Purchases: If possible, postpone major purchases like appliances or vehicles until the trade situation stabilizes.
• Budget Wisely: Review your budget and identify areas where you can cut back on spending to offset rising prices.
• Stay Informed: Keep abreast of the latest developments in the trade war and how they may affect your finances.

The current trade climate is undoubtedly creating uncertainty with the possibility of long-term impacts to Canadian’s pocketbooks. By staying informed, adapting spending habits, and looking for opportunities to support local businesses, Canadian consumers can navigate these challenging times and minimize the impact on their financial well-being. Do you have any smart shopping ideas? Please comment.