Canada is bracing for U.S. President Donald Trump’s sweeping tariffs which are set to land later Monday and which economists have warned will be the “most significant trade shock” since the 1930s.
The tariffs are expected to hit the Canadian economy hard, with some economics warning Canada could dip into a period of recession.
While the tariffs were delayed once before, there is still no sign at this point that will happen again.
Trump’s commerce secretary on Sunday said the tariffs on Canada and Mexico are still coming Tuesday, though the amount of them may be open to change.
Here’s how the coming hours and days could play out.
On Feb. 1, Trump announced he was hitting Canada and Mexico with broad-based tariffs and imposing an additional tariff on goods coming in from China.
“I have implemented a 25% Tariff on Imports from Mexico and Canada (10% on Canadian Energy), and a 10% additional Tariff on China,” Trump said in a statement.
While industry groups have been bracing for the 25 per cent figure, some members of the Trump administration has indicated that the actual number to hit Canada could be lower.
Trump’s commerce secretary said the tariffs on Canada and Mexico are still coming Tuesday, though he appeared to suggest there could be changes to the original 25 per cent plan.
Howard Lutnick said in an interview on Fox News’ Sunday Morning Futures that there would be tariffs on Canada and Mexico starting on the announced March 4 date, though Trump would determine at what levels.
“There are going to be tariffs on Tuesday on Mexico and Canada,” he said. “Exactly what they are, we’re going to leave that for the president and his team to negotiate.”
The original executive order, signed on Feb. 1, states that the tariffs would go into effect at 12:01 am Eastern on Tuesday, Feb. 4.
However, Canadian industry breathed a sigh of relief when Donald Trump agreed to pause tariffs on Canada after a phone call with Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum.
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While it was not clear what the revised timing of the tariffs would be, the U.S. decided on a one-month break. This would imply that the tariffs go into effect at 12:01 am Eastern on Tuesday, March. 4.
However, the Trump administration has not communicated this in writing.
Can Canada avoid tariffs?
The Trump administration has said this set of tariffs has to do with fentanyl and migrants crossing over from Canada and Mexico into the United States.
According to Canadian federal data, less than one per cent of the fentanyl entering the U.S. comes from Canada.
Data from the U.S. Customs and Border Protection agency shows that in January, fentanyl seizures at the Canada-U.S. border dropped to the lowest levels since 2023, with less than 14 grams seized during the month. Around 19 kilograms of fentanyl from Canada were apprehended in the last fiscal year.
Economists are warning that the sweeping 25 per cent tariffs would be the “most significant trade shock” for Canada since the 1930s, with job losses expected across multiple sectors.
“There’s lots of sectors that have a lot of jobs tied both directly and indirectly to trade with the United States,” said Erik Johnson, economist at BMO Capital Markets.
A recent report by the Canadian Chamber of Commerce said around 2.3 million Canadians work in jobs tied directly to U.S. exports, while 1.4 million Americans work in jobs tied to Canadian exports.
All these jobs would be at risk from Trump’s tariffs, the chamber said.
According to the chamber’s Canada-U.S. Trade Tracker, nearly $229 million worth of goods have already crossed the border since the start of 2025, as of February 25.
Canada’s auto industry has also been warning that the impact of Trump’s tariffs would be immediate.
Flavio Volpe, president of Automotive Parts Manufacturers Association, said the North American auto industry could shut down “within the week” if Trump’s tariffs go ahead on March 4.
According to Unifor, Canada’s auto industry directly employed 125,000 workers in 2022 including 37,000 in assembly, 17,000 in truck and trailer production and more than 71,000 in parts manufacturing.
“Everybody agreed that we would shut down, so it would be immediate,” Volpe said.
When would Canada retaliate?
Trudeau has said Canada will impose retaliatory tariffs against a $155 billion worth of American goods if the U.S. tariffs hit.
Trudeau said this will include immediate tariffs on $30 billion worth of goods as of Tuesday, followed by further tariffs on $125 billion worth of American products in 21 days’ time to “allow Canadian companies and supply chains to seek to find alternatives.”
Ottawa has said they plan to respond with retaliatory tariffs if Trump chooses to press ahead with the tariffs. Experts have said this could lead to a period of inflation in Canada.
“The impact could be immediate depending on the sector,” David Dienesch, the CEO of Allianz Trade in Canada, a company that specializes in supply trade insurance, told Global News last month.
He added, “There are concerns that any oil and gas tariffs will result in a potential increase in gasoline prices in the USA by $0.75 a gallon. Therefore, any transportation costs for goods coming into Canada from the USA would be impacted. Companies need to pass on the increases, especially for lower margin products.”
Tu Nguyen, economist at RSM Canada, said Canada’s retaliatory tariffs could also have an impact on prices.
“The impact will vary widely based on several factors, including which goods are included, whether there are Canadian substitutes, and how much of the tariffs are passed on to consumers. If Canada retaliates, prices of many U.S. imports would jump,” she said.
Nguyen said some grocery products will get costlier a lot faster.
“Goods that have no close Canadian substitutes and are perishable would see the increases first. These include fruits and vegetables, which Canada imports quite a bit in the winter months. Businesses cannot stock up on perishables the way they do with non-perishables, therefore the impact would be felt almost right away,” she said.
A recent RBC report said Canada could avoid a full-blown recession if the tariffs are in place for no more than a few weeks.
“Tariffs removed within a matter of weeks are likely to create a temporary stall for Canada. However, if they extend over a matter of months (e.g. 3-6 months), Canada’s recessionary risks increase rapidly,” the report said.
Economists generally define a recession as two consecutive quarters of an economy contracting.
