The Decibel - Why tariffs haven’t hit consumer prices hard – yet

Episode Date: August 21, 2025

When the U.S. first imposed sweeping tariffs on Canada, setting off a trade war, businesses and consumers braced for high inflation. But nearly half a year later, prices for consumer goods have not risen as much as expected. So what happened?Consumer affairs reporter Mariya Postelnyak talks about why prices haven’t gone up as much as predicted and why that could soon change.Questions? Comments? Ideas? Email us at [e-mail]

It's been nearly half a year since the U.S. announced sweeping tariffs on Canadian products, launching a trade war. Tomorrow tariffs, 25% on Canada and 25% on Mexico. Even though Trump's across-the-board tariffs were scaled back, a wide range of tariffs have persisted, as have the counter-tariffs that Canada imposed in response. And with that trade war came fears that prices would spike on everything, from cars to groceries to house repairs.

But all these months later, the worst of those predictions have not come true. The Globe's Consumer Affairs reporter Maria Postelnyak looked into why price increases have been muted so far and why that might be about to change. I'm Susan Krishinsky-Robertson, guest hosting the decibel from the Globe and Mail. Hi, Maria. Thanks for joining us. Hey, Susan. Thanks so much for having me.

So we've been bracing for price increases because of this trade war since March. Give us the big picture. How has that played out so far? So about six months ago, many industry analysts, trade experts, and economists we spoke to, they predicted this sort of doom and gloom scenario. They predicted that prices would soar in a matter of weeks to months after the Trump administration first introduced tariffs and with Canada also responding with counter levies. For example, we spoke to a few analysts in the automotive industry in March who said that, you know, the 25% U.S. tariff coupled with Canadian counterter tariffs, that's going to drive up the prices of a new vehicle, 6 to 10%. That hasn't really

been the case. Not just for vehicles, but vehicles being a sort of a prime example. Prices instead for cars have only gone up about 4%. And the overall increase that we're predicting, for example, for the last quarter of the year, is 2%. So much less than we expected. Got it. So we've seen some products, prices have indeed gone up, but others we haven't seen what we expected to see then. Exactly. Some things have definitely gotten more expensive. It's not always to the extent that we predicted. And some prices have remained pretty flat or even fallen. So let's break down some of the details here. Where are we seeing the biggest price increases since March? So the biggest price increases that we've seen are sort of concentrated around kitchen and bathroom appliances,

furniture, cars, beer, and canned goods. So just to break it down a little bit, we know that Canadian shoppers saw about an 8.5% increase in prices for things like stovetops and microwaves compared to a year prior in May. And somewhere in the ballpark of 6% more is how much they were paying for laundry appliances and dishwashers. That could be a few hundred dollars, right, depending on what appliance you're looking for. So it's not insignificant for sure. But not all appliance prices have gone up that much. So for example, things like vacuum cleaners, the price for a vacuum cleaner, on average, has fallen about 4% in June. Right. And so where we are seeing price increases, are they all coming from Canada's

counter tariffs? Not exactly. There is a little bit of, I guess, dispute around this. A few of the sources I spoke with, they told me that most of the significant price jumps that we've seen, those came from the impact of U.S. tariffs on their global trade partners trickling down to the Canadian consumer rather than Canadian counterteriffs in particular. So let me give you an example. So American appliances, they did fall sort of in the crosshairs of Canadian retaliatory tariffs, but the consequences of U.S. tariffs on their suppliers in other countries is still putting pressure on the prices that we're seeing in Canada. That's because a lot of the items being manufactured in the U.S., they're using components, derivative products, steel. They're using resources that are coming from countries across Asia, from Europe, from countries that they have tariffed. So they're incurring that cost when they're importing those goods, building it, manufacturing it. And then we're also paying that extra counter tariff when it's coming back into Canada.

So it's sort of being hit twice. Right. So even if it's being made in America, they still have to get those raw materials from elsewhere, and they're incurring those tariffs on that. Exactly. And then another example is clothing. A lot of major brands like Nike, for example, you know, they have a lot of their production in countries across Asia, in China, in Vietnam, but they're distributing from the U.S. oftentimes. So that product is going into the U.S. and then it's going to be sold, let's say, to Canada, to other countries. so it's still incurring the cost spike from that tariff, and then that's trickling back down to the consumer. So we've talked about price increases.

Where are some of the places that we're not seeing the big price spikes that we expected? Yeah, so a few of the categories that I found surprising were, for example, grocery prices. Grocery prices didn't really go up as dramatically as we had expected. So we paid in Canada around 2.8% more for food year over year in June compared to a 2% increase in 2024 and then a 9% increase the year prior. So overall, we're not seeing a dramatic kind of increase here. There are some caveats. So for example, when it comes to food like pasta, noodles, oranges, which do face some counterteriffs, and we have seen prices for those items increase. Another category I found surprising was home improvement and maintenance.

A lot of the people I spoke to, you know, they expected to see prices for doing a home renovation, installing a new island in your kitchen. Those prices were supposed to go up, especially because of U.S. tariffs hitting Canadian lumber and other building materials. But those prices have not really surged. So I think that we've seen just costs for that category of products go up. up about 1.6% year over a year in June. So it hasn't searched by any means. That's really interesting. Just to step back to grocery prices, which I know has been a big topic of conversation over the past few years, we know from covering the big grocers in Canada

that they're also changing where they're sourcing, right? So the products that they do bring in from the U.S., they're looking for other sources of products. But to step back to the fresh food you mentioned, it's really interesting that that hasn't gone up as much as we thought. Is the weather a factor there? Because, of course, we're probably talking about numbers from the warmer months. The most recent months where we have statistics are from warmer months where the domestic supply can bolster a little bit of our food supply in Canada. But, you know, during the colder months, we're maybe relying on places like California more.

Is that a factor in the food prices maybe not going up as much as we expect it? Absolutely. This is definitely a contributing factor. We're in the warm summer months. We're seeing significant, you know, priced up. declines for seasonal vegetables like cucumbers, onions, tomatoes. I think the price of cucumbers has fallen this summer about 18% year over year. Wow.

So spikes on the food side from counter tariffs haven't really, I guess, materialized or we haven't felt them as much in a lot of food categories just yet, likely because of seasonality and because we have that pretty robust supply this time of year. But that will likely change in the coming months. We'll be right back. So what are some other reasons that we haven't seen some of these prices go up as much as people were expecting? So for things like alcohol for beer, the increase in price for those items might have been

probably even worse, but we're seeing a lot of brewers, we're seeing a lot of manufacturers across different industries, you know, deliberately. spreading price increase and maintaining this sort of large inventory stockpiling for anywhere from 18 to 24 months. So we're not really seeing the most severe effects of how the tariffs might be impacting these manufacturers, these industries trickle down to the consumer just yet because they have to go through that inventory before we're able to feel the effects on our end. What about our existing trade agreement with the U.S.?

Does the Canada-U.S.-Mexico trade agreement have any effect on? on mitigating this? Absolutely. So I think that, you know, back in March, there was still so much uncertainty around, you know, what's going to be Canada's effective tariff rate, what industries will be exempt, what products will be exempt.

Right now, we know that a really large chunk of our imports into the U.S. are still exempt from tariffs. Some say that our effective tariff rate is 2.4%. There are some estimates. that bring it closer to the 7% mark, but it's still much lower than that headline rate that we're seeing. And that has to do with a lot of items being exempt through the USMCA. It also has to do with government subsidies, remissions. And according to some, there is some, a little bit of, I guess, dilution happening in the counter tariffs. So we might not actually be imposing the

counter tariffs that we had started with in April, for example, at this point. Some of those have been watered down a bit. That's interesting. The dollar has also gone up in value since the beginning of the year. Has that factor in, Maria? Absolutely. So two of, you know, the major factors that I think have kept things relatively in check and haven't pushed us into that doom and gloom situation that was anticipated is this 10% appreciation of the Canadian dollar since January. which has put a lot of downward pressure on the price that we pay for imports and falling oil prices that are also reducing the cost of transportation. So in the wake of the trade war kicking off, we heard a lot about the bi-Canadian movement among shoppers here.

Has that helped to offset any of the costs of counter-tariffs? I think so. I mean, we've heard. from large grocers like Loblaws, for example, that items that they have marked under T, so tariff, some goods that are kind of going to see a price increase from tariffs, often products that are from the U.S., those have actually seen a 20% decline in sales based on their last quarterly report. So we are seeing Canadians sort of edge away from purchasing U.S. products, especially in the summer, they have a lot more alternatives. Yeah, La Blah is one of the companies that I cover,

and I remember when they announced that they were going to bring in those T signs you referenced, right? Really clearly marking where price increases were due to tariffs, possibly because they faced so much pressure last time around with food inflation. They wanted to be super clear about the reasons why prices were going up at certain places in their stores. Yeah, and it's clearly making an impact. We've been talking about how the tariffs have had less of an effect on consumer prices than we expected. But if we zoom out and look at some of the other economic effects of the tariffs, is it a similar picture? Well, I think the economy is sending mixed signals right now.

I mean, we've seen that real GDP shrink by about 0.1% in May. Employment numbers have been falling since July, and we've seen pretty low consumer confidence across the board. But at the same time, consumer spending has actually remained pretty resilient. My colleague, though, reported earlier last week that the chief executive of Quebec's largest pension fund managers said that, you know, the full impact is still to come. And that's because pent-up pressure is likely, you know, going to push economic growth down and it's going to drive prices higher in the final months of the year. So even though some investors, you know, may have been celebrating and pleasantly surprised, that U.S. tariff policies haven't really caused more damage.

Many companies, of course, stocked up on inventory. In many cases, you know, they kept prices steady while waiting to see what's going to happen. And that eventually is going to kind of ease up and we're going to see some of those cost increases passed along. So we talk about things changing in the months to come. Of course, covering retail, I know the end of the year, it's the most important shopping season for retailers,

they often count on the end of the year for the bulk of their sales and to make up profits from quieter quarters. We're coming up on that season now as the holidays approach. So far, we haven't seen these price spikes. But what about the next few months will we continue to be spared from the worst effects of the tariffs? So as we mentioned earlier, a lot of manufacturers, a lot of brands, they're still maintaining, you know, that really high inventory that, you know, they began to stockpile. in the early months when Trump first started to threaten his tariffs, you know, companies were stockpiling, they still have that inventory to go through, but that's going to start to deplete in the months to come. And as that inventory starts to run out, we are going to

inevitably see those prices trickle down to the consumer. For example, with the 50% aluminum tariff and the threat of future tariffs, that's actually pushed up the benchmark price that manufacturers pay for a sheet of aluminum by about 200%. Wow. And, of course, we haven't seen, you know, prices for a can of beer, even brewers haven't seen their prices go up 200%. Of course, those manufacturers still have a lot of inventory. A lot of companies are still, you know,

going through all the items they stockpiled earlier in the year. But as that inventory sort of starts to disappear, we're going to inevitably see those price increases trickle down to the consumer. Maria, thanks so much for joining us today. Thank you so much, Susan. That was Maria Postalnyak, the Globe's Consumer Affairs Reporter. That's it for today. I'm Susan Krishinsky-Robertson.

Kevin Sexton produced this episode. Our producers are Madeline White, Mikhail Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior. producer and Angela Pichenza is our executive editor. Thank you for listening.