Trump and the Canadian Tariffs

Now in August 2025, amidst President Trump’s 35% non-CUSMA tariffs on Canadian exports to the US, the country’s economy is getting closer to a precipice. Canada still has its CUSMA deal but it’s coming to its conclusion next year.

This month, flows across the border will slow with Canadian exporters forced to absorb the 35% hit or to stop exporting altogether. At some point, Ontario and Quebec factories will grind to a halt, and it’s only time before the auto manufacturers find themselves left only with the Canadian market to sell to. Mexico has declined a deal with Canada, and Carney came up empty on his trip to Europe.

Worse still, is Carney’s threat of counter tariffs and hurting the US economy. With Trump clearly in control, this is nothing short of suicidal, and since he’s “elbows down hard” he is aware of the consequences. There is no CBC/CTV/Global news media broadcast that change this reality. Trump likely hates the Canadian media.

If Mark Carney/Liberal combo hang onto power into 2026, the consequences for Canada will be grave. Trump does not respect Carney or the Woke Liberals, and on top of that, he sincerely means to bring manufacturing back to the US. Canada must move on, and even if the PCs are elected in a coming snap election, there are big trade challenges to deal with. The PCs would work out a deal which might avert a national economic disaster and help reassure foreign investors that Canada has a future.

One analyst on BNN Bloomberg predicted Carney will be gone soon.

Currently Prime Minister Carney is telling the media that Canada/US trade is mostly tariff-free already. He’s not saying what Canadians want to hear, and nothing that Donald Trump and his trade team respect. Carney is wasting precious time in protecting his party’s favorites (supply management) and is willing to let the whole country suffer.

So far, Canada really hasn’t felt the brunt of the 35% tariffs, but this month, they’ve arrived. August and September job numbers and fall earnings reports will reveal the truth, and that may send Canadian stocks plummeting. Canada needs a new Prime Minister and ruling party, but the Liberals are known not to let go. This is the biggest factor in what could be a big financial mess that will see Canada’s credit rating downgraded. Ontario and Quebec will be hit hard if the tariffs continue.

The US is not suffering, and in fact, the tariffs are reducing inflation which will lead to lower interest rates. That stimulates the small business sector and the housing market. The US stock market is soaring on the optimism and growing earnings reports. Trump is in the drivers seat all the way.

See the impacts of the US tariffs on Canada below.

A Mess of Regulations, Defeat and Worry

Of course, with the Canadian economic recession, the CAD and Canadian resource prices will decline which may help to generate a trade advantage🤞vs the rest of the world. The way I see it, is that we’ll be extremely competitive going forward. Perhaps the PCs can stimulate foreign trade, but it will be Canadian business leaders that forge new trade.

The issue is whether other countries want what we can offer. That’s an unknown we’re not prepared for. The Liberals had forewarning of the tariffs and that Trump wanted to end the USMCA deal.  However, the tone deaf Liberals (as the US trade team calls them) with their “leave it in the ground” policies make it unlikely we’ll excel.  Further, exports of wood, electricity, parts, and agricultural products to the US are in doubt.

The Canadian housing market is on edge and the TSX finds itself on thin ice too, although thus far, Canadian stocks will come into view, and a much lower price of oil and further softwood restrictions by the US are going to soften up the Canadian markets. Already, Canadian unemployment has moved up to 6.9% in June with Toronto hitting 9.9%.

The EU has made a deal to buy $750 billion of energy from the US and buy US products with no trade barriers. What do they need Canada for. So Carney’s Trump card has been stolen by Trump.

What are the Negative Effects of the Trump Tariffs?

• Canada’s trade deficit swelled to C$5.9 billion, one of its largest, driven by declining exports—exports to the U.S. fell 12.5% year-over-year, despite an uptick in oil prices.

• Exports plunged 8.0% relative to baseline forecasts.

• The automotive sector suffered the most, with a 57.4% drop in vehicle and parts exports.

• GDP contracted significantly: about 1.3% below baseline in one quarter, driven by weaker consumption, investment, and exports. The Conference Board of Canada

• Employment dropped sharply—136,770 fewer jobs than expected, pushing unemployment up to 6.9%. The Conference Board of Canada

• Businesses scaled back investment by 2.8% below baseline.

• Inflation increased by approximately 0.7% above baseline, largely due to the weaker Canadian dollar and higher import costs.

What Could Happen to the TSX This Year?

Reuters Poll (May 2025) – Near-Term Caution

• Analysts expect only 0.7% growth from the TSX to 26,250 by year-end, down from earlier estimates of ~26,500.

• A correction of 10% or more remains likely in the next few months amid economic strain.

• However, longer-term optimism remains: forecasts point toward a rebound, potentially reaching 27,750 by end-2026, assuming improved trade clarity and continued rate cuts.

Trump Really Does Like Tariffs Just as He’s Said

He’s applied sanctions against Russian oil and will apply them again to Iran, India and other unsavory regimes. This will raise the price of oil and put pressure on Canada to increase its output.  Without Canadian oil, he’ll be hard pressed to meet export demands and domestic demand.  As a natural gas exporter, the US will become a major competitor, and allowing Canadian natural gas a pass-through exemption might not happen. Canada is too dependent on US pipelines given the Liberals would allow pipelines in Canada. The Liberals are getting the results they wanted — natural resources locked in, and business suffering.

Effect on the Stock Market

2 months after the election, the post-election rally has been fully erased. Given inflation is under control, earnings are strong, and Trump’s promised tax cuts, deregulation have driven the rally, it must be his tariff plan is likely the key cause of this recent correction.

The S&P 500, NASDAQ, Dow Jones and Russell 2000 are lower than they were at on Nov 6^th, and now are heading toward the pre-election fear levels. This means investors are just as afraid of Trump now than they were of Kamala Harris.

Tariffs reduce buying power, raise prices and create lower profitability thus they hamper US America’s biggest monopolies including META/Facebook, Google, Amazon, Apple, and Microsoft who pull billions out of Canada.

Research from cfainstitute.org suggests that the markets don’t like tariffs. The S&P and Megacap stocks fell on tariff announcements. Any company involved in international business will suffer. According to a Charles Schwab report, markets have always grown from Election day to Inauguration Day. This time, the S&P is down 2.5%.

If the tariffs are applied, expect the S&P 500 forecast, Dow Jones outlook, NASDAQ forecast and Russell 2000 prediction to be negative. A stronger US focus will however strengthen the US dollar forecast and may bolster small businesses. The travel sector, manufacturing sector, housing market, and other sectors will face higher costs and diminished business.

Housing and Travel Market Injured Too

The Florida housing market and economy will take a big hit given how much Canadians spend in that state. Building supply tariffs will raise construction costs and delay projects.

Outgoing Prime Minister Justin Trudeau has little to lose in a trade war with Trump. In an interview with Democrat White House spokesperson Jen Psaki, Trudeau said his government isn’t looking for a trade fight with the new administration but will have to retaliate if US tariffs are actually applied.

President Trump has been preaching the theme of strength, thus emboldening Canadian politicians to stand their ground. Pierre Poliviere says he will fight the tariffs with sanctions.  A response is being formulated.

Some Tariffs will Absolutely Happen: Mexico

My view is that these tariff threats are a negotiation tactic. However, his attitude toward Mexico is decidedly poor.

In 2019, he decided to not apply tariffs to Mexico if they maintained a remain in Mexico policy for illegal migrants. Once Biden took office, Mexico reneged on the Trump agreement and allowed 10 million illegal migrants into the US creating massive costs and problems. That raised social costs and public debt, boosted American homelessness, contributed to inflationary government spending, and generated a crime and a fentanyl drug wave across the country that killed tens of thousands of Americans.

Trump remembers this and will likely remind the Mexican President that he was let down and point to the significant financial and cultural damage the US endured. The Mexican President has spoken dispassionately about the US situation, so Mexico will get hit hard with tariffs.

Canadian Tariffs Will Hurt Both Countries

Canada on the other hand has also failed to live up to good neighbor requirements by letting some drugs into the US and reducing its military spending and responsibilities. Canada’s Woke Liberal leader Justin Trudeau, not a favorite of President Trump has burdened Canada’s provinces with harmful regulations and excessive immigration while not providing housing and jobs for the newcomers.

Canadian economists are speculating that his proposed 25% tariffs could create hundreds of thousands of lost jobs and lower Canadian’s standard even further. Toronto’s unemployment rate is currently 8.2% and could rocket this year. Ontario may be the key target of Trump Tariffs with hundreds of thousands of jobs lost. Here’s Premier Doug Ford’s response:

Current tariffs on Canadian products such as aluminum, steel, and softwood lumber have also hurt Canada’s economy.

See more on US stock market predictions, US dollar forecast, and the US inflation forecast.