Canadian industries ranging from aerospace to retail, construction and energy are warning that an escalating trade war could raise costs, disrupt supply chains and hurt competitiveness as Canada prepares retaliatory tariffs on an array of U.S. goods.
Ottawa last month announced plans to apply tariffs on U.S. steel, aluminum, some food products and other goods on July 1, and asked industries to comment on its plans by Friday. The move is intended as retaliation for a 25 per cent tariff on Canadian steel and a 10 percent tariff on Canadian aluminum set by the Trump administration.
The Canadian Construction Association said it supports the government’s moves as a way to protect Canadian industry, but cautioned the dispute could delay $180-billion of government investment in infrastructure.
“This trade war could cause significant delays with projects, escalating costs, all leading to high risk and lower productivity for the industry, and depriving these communities of their necessary infrastructure improvements,” association president Mary Van Buren said in an interview.
“This could also lead to reduced investment in R&D, which is necessary to bring innovative solutions to the industry and over the long term, which could hurt Canada’s competitiveness.” Construction represents about 7 per cent of GDP and employs 1.4 million people.
The Aerospace Industries Association of Canada said the tariffs would deeply affect the aerospace sector on both sides of the border, hurting Canadian aerospace companies and their suppliers and customers in the United States.
“The tariffs imposed by the United States on Canadian aluminum and steel products threaten highly integrated supply chains on both sides of the border, weakening global aerospace trading dynamics and placing our global competitiveness at risk,” said Jim Quick, president and CEO of the AIAC.
In Alberta, the oil industry relies on integrated supply chains and is concerned prices could increase even for products and equipment that are not directly targeted in the countermeasures.
The lobby group for Canada’s biggest oil and gas producers told federal officials that costs could climb into the hundreds of millions of dollars, particularly if tariffs are in place for an extended period or result in further escalation.
“We are very concerned that the proposed tariffs and other trade barriers will have an immediate and lasting effect on Canada’s competitiveness and overall ability to attract and retain capital investment,” the Canadian Association of Petroleum Producers said in a submission to Finance Canada.
“We support the Government of Canada in its efforts to maintain and enhance free trade and to restore a normal trading relationship with our ally, friend, and vital trading partner.”
Retailers are concerned that they and consumers could face higher prices and bear a disproportionate burden of the Canadian response to U.S. tariffs on what are essentially industrial products.
Retailers point to a number of categories in which there won’t be enough domestic product to replace the imported goods on which Canada would impose a tariff, leading to potential shortages.
As much as 80 per cent or even more than 90 per cent of the products in many categories that have been selected are currently imported, Karl Littler, a vice-president at the Retail Council of Canada, said in a brief to the federal government on Friday.
For example, a major copier and printer paper supplier has been told that domestic vendors cannot meet its volume needs and that the inventory can only be sourced from the United States, he said. A supplier of bedding has been told the Canadian textile industry cannot meet its needs.
In addition, retailers often do not have the flexibility to switch their supply chains quickly because of lengthy contracts for many of their goods and legal liability for completing those obligations.
“Many suppliers have no production in Canada,” Mr. Littler noted. “It will take a number of months at minimum to develop this. Until such time, price increases will impact the consumer.”
He pointed to difficulties tied to high-priced consumer goods such as refrigerators and washing machines, which are on the government’s potential target list. These are “big ticket” items on which a 10-per-cent tariff could approach or exceed $100 a unit, potentially deterring purchases altogether.
The Canadian Vehicle Manufacturers Association, which represents U.S.-based auto makers Ford Motor Co. and General Motors Co. and Italy-based Fiat Chrysler Automobiles NV, refused to make its submission on the tariffs available. The three companies are among the largest users of steel in the country.
The association also refused to say whether it opposes or supports Canada’s retaliatory tariffs.
Among CVMA members, General Motors of Canada Co. also refused to say where it stands on the tariffs, as did Fiat Chrysler Canada. Ford Motor Co. of Canada Ltd. did not respond to requests for information.
Honda Canada Inc., which is not a member of CVMA, but whose manufacturing arm is also a large steel buyer, refused to say whether it made a submission or where it stands.
Toyota Motor Manufacturing Canada Inc. said it did not plan to submit a comment to the government.