‘A Really Serious Economic War’: Canadian Manufacturing, Oil Sectors Grapple With New Tariffs

An oil processing facility southeast of Fort McMurray, Alta., on April, 24, 2024. The Canadian Press/Amber Bracken

The newly imposed U.S. and Canadian tariffs will present substantial uncertainty and lead to a financial setback in the short term, to be followed by a period of readjustment, say Canadian manufacturers and oil producers.

U.S. President Donald Trump has announced, starting on Feb. 4, a 25 percent tariff on imports from Canada and Mexico and a 10 percent tariff on China on top of existing tariffs on that country. The tariff on Canadian oil and gas will be lower, at 10 percent. In retaliation, Canada says it will put 25 percent tariffs on $155 billion worth of U.S. imports.

The announcements have left Canadian manufacturers facing upheaval and financial losses. The tariffs will have a heavy impact, says Burlington, Ont., businessman Ron Foxcroft, who owns Fox 40, a manufacturer of referee whistles and other types of sports and safety products, as well as Fluke Transport, which runs trucks between Ontario and four U.S. states.

“Tariffs create an economic war, and this is a really serious economic war,” Foxcroft told The Epoch Times.

“Obviously our [import] prices are going to go up 25 percent because of the tariff. So, this will not only hurt us, but it'll hurt the supplier in the United States, because we’re going to have to seek alternate arrangements.”

Foxcroft sells his products to 140 countries but says almost 20 percent of his overall sales are to the United States and therefore the impact of the tariffs on his business sales will be considerable. Still, he says, businesses will eventually adjust to the new environment.

“That’s significant, but we‘ll find a way. Right now, we’re not planning expansion, we’re not planning investment, and we’re not planning new hiring in the short term,” Foxcroft said. “Entrepreneurs face headwinds every day. So, given time, we’ll find alternate solutions to adjust to all these tariffs.”

The effects may be more pronounced for Shercomm Industries, a rubber products manufacturer in Saskatoon. CEO Mike Richards says 60 percent of Shercomm’s commercial and residential products go to the United States, so the tariffs are “a major concern.”

“When trade barriers go up, businesses like ours, they face rising costs, supply chain disruptions,” Richards told The Epoch Times.

“We make products that aren’t necessarily made in the United States, so our American customers that are buying those products in the short term are going to, unfortunately, have to eat [the cost]. There are some things where I do see, short term, our customers looking elsewhere, which is going to hurt us.”

Richards said the federal and provincial governments have not done enough to protect Canadian businesses like his, and he wonders what they will do now.

“How are they going to strengthen local businesses? How are they going to, for lack of a better term, put Canada first?” he said. “The average person would say, ‘Oh, subsidies.’ And I would say, ‘No, that would be the worst thing.’”

Richards said more money for research and development, less red tape, and better facilitation of exports, including oil and gas, would be more beneficial.

“We’ve been so reliant on the States that something like this is catastrophic. Whereas, if we protect for contingencies in the future, if this were to ever happen again, we could just kind of put our nose up at it and say, ‘Oh well, it’s just one piece of the pie,’ right?”

Workers stack and sort softwood lumber at a sawmill in Mont-Blanc, Que., on Jan. 20, 2025. The Canadian Press/Christinne Muschi

An analysis by the Canadian Chamber of Commerce says 2.3 million Canadian jobs are supported by exports to the United States, and 1.4 million American jobs are supported by exports to Canada. It adds that the tariffs could shrink Canada’s GDP by 2.6 percent.

The Canadian Federation of Independent Business says 51 percent of the country’s small businesses are involved in import and export activities with the United States. The association’s president, Dan Kelly, says that with the tariffs in place, producers need to raise their prices, which will lead to “even weaker consumer demand.”

The Canadian Manufacturers and Exporters says the tariffs will have an “immediate and devastating impact” on Canadian manufacturers and their workers, saying the sector is “one of the most trade-exposed and vulnerable sectors of the economy.”

The federal government has announced a remission process where, under specific “exceptional and compelling circumstances,” relief from the Canadian tariffs on U.S. imports can be considered for companies that would be severely impacted by those tariffs. Prime Minister Justin Trudeau has also said he’s working with the premiers to support Canadians impacted by the tariffs.

Oil Markets

Kevin Birn, an energy analyst and vice president at S&P Global, says that while a 10 percent tariff on energy exports is less than the 25 percent imposed on other goods, it’s “still a lot of money.”

“Take a simple US$60 WCS [Western Canada Select] pricing. You add 10 percent to it, you’re talking about six bucks times [4.4 million barrels] a day, times 365 days in a year—that is a significant economic rent,” Birn said in an interview.

This crude math suggests added costs of US$26.4 million per day, or US$9.64 billion per year. Given the exchange rate of 68 cents U.S. equalling one Canadian dollar, these prices would be C$38.8 million daily and C$14.15 billion annually. While the importer pays the tariff costs, it’s not yet clear how the markets will bear what Birn calls a “very distortionary” cost.

“It’s going to come down to the optionality of the U.S. system to swap away from Canadian crude rather than pay a higher price,” he said. “The reality is likely, on the energy side, a shared impact for both producers and refineries and then consumers. Anytime you add costs into a system, you add inefficiencies into it, and it can be inflationary.”

Birn says the tariffs reverse a trend of economic integration with the United States and will add to growing domestic pressure to build Canada’s domestic pipelines.

“Certainly Canada will aggressively look to offshore markets, and some of the things that divided Canadians in the past may not be as divisive,” he said.

Alberta Premier Danielle Smith, who has met with Trump and his officials to discourage them from imposing the tariffs, said the efforts of her government have helped in reducing the U.S. tariffs on oil and gas to 10 percent. She said she will continue engaging with American officials to persuade them to remove the tariffs altogether.

Smith and Saskatchewan Premier Scott Moe have also asked the federal government to remove barriers for resource development projects.

US Tariffs

Trump says the tariffs are needed to make the targeted countries take action on the problems of illegal immigration and drugs entering the United States through their borders. He has also mentioned trade deficits when discussing his order to impose tariffs.

“I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it,” Trump said on Feb. 1.

Defending the president’s order, Vice President J.D. Vance said on X on Feb. 2: “Mexico sends [a] ton of fentanyl into our country. Canada has seen a massive increase in fentanyl trafficking across its border.”

He added that the United States is done “asking nicely,” and that now is the “consequences phase.” He also cited Canada not meeting the required NATO spending of 2 percent of the national GDP, something Trump has taken issue with on different occasions.

“Spare me the sob story about how Canada is our ‘best friend.’ I love Canada and have many Canadian friends. But is the government meeting their NATO target for military spending? Are they stopping the flow of drugs into our country? I’m sick of being taken advantage of,” Vance said.

In announcing Canada’s counter tariffs, Trudeau said Canada has introduced a $1.3 billion plan to increase border security and that the tariffs will hurt people on both sides of the border.

“Our border is already safe and secure, but there’s always more work to do. Less than 1 percent of fentanyl, less than 1 percent of illegal crossings into the United States, come from Canada,” he said on Feb. 1, the same day the White House announced tariffs on Canada.

“As neighbours, we must work collaboratively to fix this. Unfortunately, the actions taken today by the White House split us apart instead of bringing us together.”

Finance Minister Dominic LeBlanc said Canada and the United States have “highly integrated” economies, and that Canada’s preference is to preserve this relationship.

However, he added, “in the face of the unjustified U.S. tariffs against Canadian goods, we are taking action to protect our economy, our workers and our businesses.”