Front Burner - How will the new tariffs hit Canada's economy?

Episode Date: August 25, 2026

U.S. President Donald Trump is threatening yet more tariffs, saying he’ll increase levies on cars, trucks and steel to 50% on January 1. This latest announcement comes as new tariffs came into place on Saturday on a number of Canadian goods worth $28 billion after trade negotiations fell apart.Peter Armstrong, CBC’s Senior Business Reporter, is back on the show to talk about what moving forward without a deal on these new tariffs means for the Canadian economy and what Prime Minister Mark Carney’s promised “dollar-for-dollar” retaliatory tariffs could look like.For transcripts of Front Burner, please visit:   https://www.cbc.ca/radio/frontburner/transcripts

Something is happening in Dawson Creek. A wave of violence has swept over this community of just 13,000 people. It's like the kind of stuff you only hear about on TV. 15 murders in the last five years. Some criminals, I put them into the category of supervillains. I'm Timothy Sawa and from CBC's On Cover and the Fifth Estate, an investigation into deaths and disappearances in Dawson Creek and what's behind it all. I'm not saying another word, leave me alone.

The Mile Zero Murders, available now on CBC Listen or wherever you get your podcasts. This is a CBC podcast. Hey, everybody. I'm Jamie Poisson, and I've got Peter Armstrong, CBC's senior business reporter, back with me today. We just spoke last week when the U.S. and Canada were approaching the first trade deadline on Tuesday night, which already feels like a complete lifetime ago for us both. I wanted to check in with him again in the fallout of these trade talks as we get a better sense. of what moving forward without a deal will mean for Canadian consumers

and the economy and with new threats from President Donald Trump to increase tariffs on key sectors come January. We'll also discuss what Prime Minister Mark Carney's promised dollar-for-dollar retaliatory tariffs could look like. So Peter, welcome back. Thanks for making the time. Always glad to be here, Jamie.

A couple hours before we sat down, US President Donald Trump announced that he is adding more tariffs come January 1st, increasing the current rate on cars, trucks, and steel to 50% from 25%. He posted on true social that I'm going to read directly from this. Canada has been ripping off the United States of America for years. Trump continuing on saying build in the U.S. And there are zero tariffs. And then he goes on to say that Canada is among the worst nations in the world to deal with. They feel entitled. And yet we don't need Canada. They need us.

This is really just a further escalation after trade talks broke down Friday night. I want to get to Carney's promised retaliatory measures in a few minutes. But first, like, what is your reaction to these latest threats? So there's sort of two things to keep in mind about this. One is what we talked about last week, that threat of an escalatory cycle where we do something, they do something. And that sort of becomes this self-fulfilling prophecy. and it feeds off itself and it's very damaging. But remember, which is the second thing, it's damaging to both sides.

You know, one of my favorite economists is Justin Wolfers from University of Michigan, who is ripping off the fact that they're trying to use sanctions and tariffs on Iran to keep Iran from, you know, doing what it's been doing. And his tweet was, Trump is trying to boost the U.S. economy by making it harder for Americans to trade with the rest of the world, Canada, I think. he means there. He is also promising to destroy Iran's economy by making it harder for Iranians to trade with the rest of the world. It's that sort of embedded contradiction here, right? And if you think about what he's saying, what Trump is threatening to do to what he calls the Canadian

auto industry, well, who would be hurt by that? North American automakers have lost like $110 billion in added costs over the last year and a half because of his tariffs. But the key there is that US exports, American export of cars to Canada is down 22% in the last year. They've lost $7 billion. And, you know, Canada's the largest export market the U.S. has for its cars. It's bigger than the next three or four combined. And when you know that a tariff is just a tax and it's a tax on the Americans that will pay it to the U.S. Treasury, what he's threatening to do, he says to Canada, is actually doing damage.

And it is already doing that damage to American manufacturing. as American businesses and American consumers. Yeah. The Prime Minister was speaking in Levy Quebec today on Monday. He talked about how these new threats against autos were revealing. And the president is doing what we, not just suspected, but we had confirmed through the terms that they were offering. Instead of a quick change to the terms in the automobile industry, they were putting on the table terms that gradually would have that impact. And we wouldn't accept that. So it's very revealing.

Instead of, he said, like, a quick or small change to the auto industry, they were, like, increasingly putting on terms that would gradually have had the impact of this new 50% tariff threat, right? And Jamie, they have told us repeatedly that that is the American side, that that is what they want to do. Howard Lutnik was in Toronto at a summit, I think back in October, where it was Chatham House rules. So he wasn't to be quoted directly. But as soon as he said this, it was flooded out to Canadian media. that he was dismissing any prospect of a comprehensive auto deal. And his line was that the U.S. could continue buying car parts from Canada. But that's about it.

He did not foresee a world in which the Canadian manufacturing of vehicles was still a thing. And that has now been borne out, at least by the Canadian version of the events that led up to the disillusion of talks on the weekend. I think the answer to this is no, but at this hour that we're talking, which is 2 p.m. Eastern time. Have we heard from any of the big auto manufacturers? No, we haven't. And I don't imagine that we will, if only because they have so much embedded in this process. And the big three, when you talk about the American auto manufacturers, Ford and Stalantis, and, you know, they have no interest in getting involved in the public conversation because frankly, they're kind of working both sides of this. And they know the damage

that's being done in Canada is damaged to them. Like, it doesn't matter to Ford. that some of the damages in Canada and some of the damages in the United States. And so we know that they're lobbying the U.S. side. We know they're lobbying the Canadian side and trying to get the best deal for Ford. But, you know, they also know that a 22% drop in automobile exports to Canada is a problem for their own bottom line. Do you have any thoughts on why Trump announced that these new tariffs would be implemented come January, 27? Like, why wait that long? Is it because there's a hope that we can get off this kind of runaway train?

The manufacturers alone of the big automakers employ something like 950,000 U.S. workers. And the whole concept, like for 70 years, go back to the 1960s, since the Auto Pact, we've been building closer and closer alignment where they have what they call just in time delivery, not to get too deep in the weeds, but it means you don't have to pay to store anything anywhere. The stuff just rolls off one assembly line into a truck. It arrives just in time at the next place where they put it on to the engine. They take the engine off the assembly line. It arrives just in time to go into the manufactured vehicle. These parts cross the border between eight and 12 times on average as they work their way through the completion of a vehicle. And if you start to gum that process up in any real way, all of a sudden, those factories, those plants, those assembly, uh,

manufacturing facilities simply don't have the parts they need to slot in. So production stops. And so you're you're sending 950,000 U.S. auto workers home. There's, Flavio Volpe was tweeting about this from the Canadian automotive parts manufacturers association, you know, $29 billion worth of U.S. auto parts go into Canadian assembly every year. That goes down to the damage, you know, we say this repeatedly, and it sounds like something of a mantra that we say to one another in Canada that just doesn't seem to resonate in the United

States, but tariffs damage everybody. And the impact they have, like, you look back to Liberation Day or whatever it was called last year, the reason that didn't cause a global catastrophe was because most of that was pulled back. And all the exemptions started to kick in. The difference with these 338 tariffs that kicked in in Canada over the weekend is for the first time that real barrier, that the protection that was provided by Kuzma, you know, USMCA-C-C-A-C-C-U-M-W, we call it here, that has been broken. And that's going to be a problem. If the broader agreement no longer offers protection, then what are we talking about?

Why are we even in that deal? Let's put these new threats, these January threats, we'll call them that right now, aside. And I just want to focus with you on what we're dealing with in the moment, which is the 338 tariffs. As of Saturday, 50% tariffs are in place. on hundreds of Canadian products worth more than $28 billion from plywood to cement to wine to hockey sticks. And they might be here for a while. I'll just note that there's reporting that the prime minister is not trying to restart talks at the moment. There are plans to prepare for this to play out until the end of Trump's term in two years.

And how are you expecting to see this impact businesses in the coming days, weeks, and beyond? So let's start at sort of 50,000 feet and zoom in. And if I may, I'll start by quoting the Wall Street Journal, not exactly a lefty organization that has called this the dumbest trade war in history. It said that trade war, it got dumber this weekend as Mr. Trump escalated with another round of border taxes on Canadian imports, a mere 10 weeks before midterm elections. Mr. Trump's latest round of border taxes will hit an array of consumer goods. You mentioned a lot of those.

Republicans, it goes on to say, are already getting pounded on the campaign trail over his tariffs and inflation. And here's my favorite quote of the day. One reason for Mr. Trump's frigid approval rating is that voters believe Mr. Trump is waging blunderbuss wars without a strategy and on trade. They're right. So that's the Wall Street Journal. That's what they're saying.

And that is very true. Now, you can zoom in to each of these individual industries. And we've been speaking here at CBC News. My colleagues, Jeff Lagerquist and Abby Hughes have been talking to these companies day in and day out leading up to this deadline. And they saw their business start to dry up 10 days ago. As Americans knew they were going to get faced with at least the uncertainty of potentially getting hit with tariffs.

And you remember from the first tranche of tariffs, there's a lot of confusion when these things kick in about how is it going to get paid, what it's applied to, stuff gets wrongly applied, stuff doesn't get applied. And then they backdate it and say, no, no, no, you have to pay for this. So the fear of tariffs is in a lot of ways even worse than the. the tariffs themselves. Right. And that led to all of those companies or a lot of those companies, just seeing those orders from the U.S. dry up. We talked to, you know, small and medium-sized businesses that are way more hit in this round than the bigger industries were more targeted

in the first round. So the small and medium-sized businesses that don't have trade lawyers and don't have industry associations, just putting up on their website saying, look, we can't sell the United States right now because we don't know how to manage it. And so that is going to have a profound impact. That said, there is Barry Appleton, a great trade lawyer who writes an amazing substack that I read every day. He wrote a piece last week, or maybe it was over the weekend, that highlighted that many of the products that are being targeted in this latest tranche of tariffs from the United States are actually products that in different parts of the country, we import at an almost equal number from the United States. So, you know, you got somebody who makes

something in BC and they ship it down to Washington or Oregon or California. And you've got a company in Upper New York State that sells the same product to Ontario, Quebec, Manitoba, right? And so are there ways we can start to offset that and, you know, buy the product from BC in Ontario and the product from Ontario in BC and try to offset that and have sort of convoys moving along the highway, maybe subsidized by the feds to try to try to facilitate that trade. But make no mistake, it's going to hurt. It's going to cause very real pain. Much like the first tariffs were really only super painful in the specific towns that the industries were hit in. I think of Windsor, Ontario and Sue St. Marie, and these towns that were hit so inordinately

hard, the same thing applies here. They're not evenly spread out. They're not equally applied. Where they hurt, they hurt a lot. But remember, on the other side, the booze bands, the tourism bands, those aren't equally applied either. And they're being felt particularly in certain areas and certain regions in the United States. Yeah, maybe worth pointing out here. Like, I know the Royal Bank, for example, says that the size of these new tariffs are not large enough to kind of derail our economic growth, that they'll hit 5% of Canadian exports to the U.S. But economist Trevor Toom also argues that those aggregate numbers hide a lot, right? And his estimate is that this could affect 90,000 jobs quite a lot. And those weirdly spread out because of just sort of the nature of an

integrated economy spread out a little bit more evenly. Those job losses that Trevor Tum was talking about, like, for example, Alberta is going to face like 1% of the increase in tariffs, but they might lose as much as 9,000 jobs, according to Trevor's analysis. And we have talked to businesses, Jamie, you've talked to these businesses that say they won't survive, that this, it's been 15 years of low growth in Canada and the pandemic and then emerging from the pandemic and all of these hard times that we've had. And we have had hard times.

Remember, the Canadian economy was weak heading into the trade war, which made us more vulnerable to all of this. And it's been made waker still by all of these tariffs and all the uncertainty even more than the tariffs. So those businesses that have just weathered storm after storm and fight after fight, if these stay on for very long, they say simply, I don't know how I'll be able to survive, what I'll be able to do in terms of bank and payroll. And they're very worried about it. And their employees are worried about it, which means those towns are worried. about it. Well, the lunch place that supports the manufacturing plant, auto manufacturing plant, right? You can see how these really start to go down the line. Something is happening in Dawson Creek. A wave of violence has swept over this community of just 13,000 people.

15 murders in the last five years. I'm Timothy Sawah and from CBS. Cs on Cover and the Fifth Estate, an investigation into deaths and disappearances in Dawson Creek, and what's behind it all. The Mile Zero Murders, available now on CBC Listen or wherever you get your podcasts. So I imagine, look, like one way to mitigate job loss is through government support here. The Prime Minister said that that is coming. We will provide support, and we will do whatever it takes to support these businesses, and we will support these businesses for as long as it takes. In other words, beyond the life of this U.S. administration.

Okay, so there's various... What do you know about what the government is considering right now and what it could actually look like? So look, there's still a lot of information to come. We don't know. We know, as I say, that a lot of these businesses affected in this latest tranche are smaller, medium-sized businesses that are more vulnerable.

don't have the sort of institutional supports that the big industrial players do. And so that's going to require a little bit more of a defter hand because it's easier to just sort of help an industry than it is to help a bunch of small players. And so that will require help. The EI program is going to have to be revamped, right? If we're talking about losing 90,000 jobs as a result of this, you're back to having conversations more akin to what we're talking about during COVID than you are during a normal economic downturn. And we don't have those. answers. We don't know what the reciprocal response will be. They say dollar for dollar. It's important to note that that doesn't mean product for product. We went through this with Christy Friland in the

first Trump term of trying to get a better sense of where the leverage can be applied. And again, regionally, politically, product wise, you want to be able to do as much damage to their economy and not drive up inflation or make Canadians pay for more. It's a super tricky, needle to thread. And tariffs will raise money, but it will, and that money can be used to help some of these industries. But look, a tariff is a tax. It's me and you and the Canadian businesses that will pay for those taxes, pay for those tariffs, and that's where they're getting the money to help. So it, it's really, you know, and Mark Carney does not strike me as somebody who's a particularly big fan of the reciprocal tariffs. He eliminated a lot of them after he came to office,

not just to as a give to the United States, but as a give to the Canadian economy and the people had voted them in to say, you guys shouldn't be suffering for our trade war and remove them. There's a political calculus that I'm not in a really great place to try to explain, but you can sense it, Jamie, everywhere you go, there are people saying,

we got to do something. So I understand the political calculus. But economists often talk about, you know, tariffs are like putting rocks in your harbor. It makes it harder for ships to come in and come out. And it's a lousy thing to have to deal with. And just because your enemy or your neighbor or whoever you're fighting with puts rocks in their harbor doesn't mean you have to put rocks in your harbor. A lot of people, a lot of economists will say the best response is to do nothing at all.

Let these tariffs and the threat of these tariffs weigh on the American economy and let Canada try to grow its way through this tough period. But as I say, there's a political calculation there that is harder than I'm admitting. because I don't have to sort of factor in the politics of it all. Right, right. I mean, just on that point, are there any efforts being made to try and avoid at least some of the damage that happened last time when we did retaliatory tariffs? Like, are there other ways to do it that are less damaging? Yeah. Well, so like last time they targeted Florida orange juice and they went after Kentucky bourbon and California wines.

We've already done the wines and the bourbon because of the booze bands. But they'll try to pick specific products that we buy from the United States that we could easily source from somewhere else. And not we could get a shipping container to Europe and bring stuff over, stuff that's already on the shelf that you can just go along and look at and say, well, that's the American product that has a 20% or a 10% or a 50% tariff on it. So it's more expensive. I'm going to buy the, you know, the Mexico. or the Peruvian or the European or the Canadian product. And trying to come up with the basket of goods that can match dollar for dollar, it's going to be hard, but it is doable.

And it's, but like I say, it is incredibly delicate. And it's a very, very tricky balance to strike. And then look, Peter, you were alluding to this earlier in our conversation, but like there is just this other more intangible effect of all of this. and that is that this chaos, this uncertainty is bad for business. You know, research from the Bank of Montreal is raising concern about investment in Canada. It says business investment had been climbing to its highest level in a decade, but that this breakdown in trade talks could reverse that momentum, right?

For sure. The amazing Randall Bartlett from Desjardin had very similar research that, like, the tariffs are bad. The tariffs are terrible. The uncertainty that accompanies the tariffs is actually way worse. And it means like if you were a company in Canada, you're running Jamie Inc. And business has been okay. You've done all right. You're not necessarily targeted by the tariffs, but you know, you see the economy slowing.

But business has been good. They've been picking up. And if you could, you'd really like to go out and buy a couple of new trucks or add a new building to your warehouse or hire a couple of new employees to help you get more. productive. Is now the time you're going to put out that capital expense to to hire them, to build them, to, to purchase that equipment? No. And why? Because you have no idea what the next six months or year or two years left of Donald Trump's term. So you're going to slow down on that. And if you slow down on capital investment, then business investment across the country slows in scale. And that means there's less hiring. And so, you know, you get into that low hire,

low fire situation that we've been in. That sort of gets exacerbated because all of a sudden people are saying, well, we've got to let a shift go. And we're certainly not going to hire the position, the people that retired or moved on or did other work. And that, that's how you really chip away at not a lot of growth to begin with and how you can get back to almost no growth, perhaps zero growth, perhaps even slip into a recession. Yeah. That's, that. And that's, That's not what the forecast is, to be sure, but the forecast is that if you shave off a half point from where we are, you're back pretty close to the line. So you're back watching for that and worried about it. And the implication that comes with that, consumers react to that.

They say, oh, I need a new winter coat this year. But man, the economy is lousy and everybody's talking about maybe there's going to be a recession. I'll just get the buttons on last year's coat patched and move on. And if you scale that out across an economy, it has a very real impact. I want to come back to retaliation with you. So we spoke about the retaliatory tariffs, but there are other tools here, right? Just last month, Carney said that he didn't see the value in using Canadian energy exports as a bargaining chip in negotiations with the U.S. But this past weekend, after talking about America's energy dependence on Canada, he said,

I don't think they want us to stop sending it. Of course, we heard Doug Ford raising that process. again today, could you describe for me what kind of retaliation that would actually look like, starting with what a province like Ontario could do? And how likely you think that is at this point? I'll be honest. I don't think it's likely. You know, you look at oil, potash fertilizer, and electricity. If we impose export taxes on them, basically you're putting export taxes on the oil industry, on the potash industry. Two of the industries, two of the only industries that have actually added to Canadian growth. And especially on the oil side, on the energy side, Canada is just back to, and I don't even know that it's all the way back to proving to the world that it's a reliable growth of energy and of energy products to the world.

starting to limit what goes abroad makes people say, oh, wait a second, maybe they're not as reliable as we thought. Electricity is the other big one that like, you know, Quebec and Ontario and New Brunswick provide an awful lot of electricity to the northern states, provide the electricity to the powers their homes. Turning that off would be, or even just making it more expensive, would be a severe escalation. And even just Doug Ford in threatening it is, is, is, is raising the ire of the Americans and is adding to that, that cyclical escalatory situation that we're already in. Well, he can kiss my ass as far as I'm concerned.

We're going to go at him full steam. Maybe I have an idea. We'll get Danielle Smith on board so the cars of their manufacturing won't be able to fill up because we'll be controlling the oil and the gas going down there. And maybe what we should be doing is charging him triple on the oil, triple on the potash on the uranium, on our metals and our rare earth metals. I mean, just to pick up on the point that it's raising the eye of the Americans,

just as we've been talking, Trump posted again on truth social, picking up on kind of what Doug Ford's been saying. Lots of bluster from Doug Ford, who is better known as the less charismatic, intelligent, and overall unimpressive brother of the late great Rob Ford. So you guys aren't going to be best friends. Let's get your reaction to that. Well, I can go back and forth with Trump.

You know, I'm not going to. He talked about Governor Carner. He's calling him Governor Carney again and Flunky Ford. They will not be allowed to keep taking advantage of the United States and that these clowns need to fall in line. Yeah. And points out in that, if I might just jump in, that much of the electricity oil and gas that Canada gets is transported through the USA,

which is true. All of the Enbridge main line, dips down through south of the Great Lakes and through Michigan before coming back up in the United States. Everybody for generations has flagged that as like, why did we do that? Wouldn't it be better to put it over the top and keep it all in Canada? And isn't that something of a security risk? But the situation with the United States really until the last two years was such that the people

who said that that was a real security risk were not taken seriously. Well, it is a serious risk now. President taking very specific game at you in deeply personal ways. Good. Well, why is that good? Well, good. You know, something? I've been in this game a lot longer than he has.

I've got a skin on me like an alligator. And you think an insult from him hurts me? Well, bring it on, buddy. I'm ready. Bring it on. You know something? I've dealt with guys like you my whole life. And guess what?

Y'all become losers because you're a loser. And just, Peter, that you have the president of the United States. It's a country that we used to be very close allies and friends with, essentially relishing in us, I don't know, not doing well, although I should say it's not true that our unemployment rate is at 10%. And essentially, you know, bragging that we're not doing well because they're taking our businesses and jobs. And that they're getting all of this benefit at our great expense. Yeah, and, you know, Jamie, you and I both spent a bit of time working out of the Washington Bureau this summer and speaking with American sources and American businesses and American friends.

And I was struck when I was down there. I was down there in July around the Canada Day deadline for the extension of Kuzma and then the 4th of July and was out with, you know, American friends. And I was really reminded how much I like Americans and how we'll find our way through this. Stuff like this will make that notion of we'll find our way through. this a lot harder. And even if two years from now, Trump is out of office and somebody else's president, I don't think that next administration is going back to Ronald Reagan or Clinton or

Obama. I think the focus on America first is one that is not going away. And I think the white hot, ferocious anger in Canada at the disrespect, at the 51st state nonsense and at this governor Carney business and all of that. that. I think that will have very clear and very lasting damage. And I think this only deepens. You know, I talked about 22% fewer cars sold from the United States to Canada last year to the tune to $7 billion. Is there a world in which Canadians will say, oh, yeah, I'll just, I'll just buy a Ford F150. It'll be fine. Is there a world in which they say, actually, no, the Silverado is made in Canada. I'll buy that instead. I think so. And I think the damage that's

done from this kind of rhetoric. I don't even know what the word is for it is, is very damaging and very serious and will take a very long time to sort its way out. Yeah. I mean, it's funny you say that I was, I was out somewhere the other night and people were just like Googling where their cars were made. Yeah.

Just, you know, out of curiosity. To end this conversation, we talked about whether we're even, we could even say that we are. are legitimately in Kuzma right now, are the people that you're talking to legitimately worried that the entire agreement could collapse? And if so, you know, just talk to me a little bit about what kind of impact that would be. I don't think so. But you certainly can't say that's impossible at this stage, because look at what's happening that we would have previously said is impossible. And undoing Kizma would not just be bad for Canada, though it would. It would be very

bad for the United States. You know, the Canadian American Business Association put out a report last week found they'd lose 215,000 jobs by even just sort of undoing Kuzma or USMCA, let alone having a completely collapse. You will need some kind of an agreement to govern whatever trade is left. And there's still going to be trade. We are too close in geography to say we're never going to trade with these people again. That's just not in the cards. And that's, That's why I think everybody's so flummoxed by how aggrieved and personal and petty this is getting. Because at the end of the day, both countries benefit from this. Businesses in both countries are the beneficiaries of this.

Workers in both countries are better off when the trade is easy rather than hard. And eventually, I think we get back on track. But boy, we're in a bad spot right now. Okay. Peter, thanks for this. We'll talk again soon. Thank you. Cheers. All right, that is all for today.

I'm Jamie Poisson. Thanks so much for listening. Talk to you tomorrow. For more CBC podcasts, go to cbc.ca.ca slash podcasts.