Trump’s new tariffs will be ‘a crack in the CUSMA shield,’ industry groups warn

Canada's economy has been shielded from the impact of U.S. President Donald Trump's tariffs, largely due to exemptions under the Canada-U.S.-Mexico Free Trade Agreement (CUSMA). However, new 50 per cent tariffs imposed on July 24 by Trump are expected to create a "crack" in that shield, warning industry groups. Canadian Federation of Independent Business vice-president Jasmin Guenette stated that the CUSMA shield would no longer exist as before if the new tariffs are implemented.

Over 2 in 5 Canadian exporters currently export to the U.S. products that would fall under the new tariffs, with 77 per cent expecting revenue loss and 35 per cent expecting to lose at least half of their revenues. The tariffs would affect nearly $28 billion in annual Canadian exports to the U.S., representing more than five per cent of Canadian goods exports.

Additional sectoral levies in aluminum, steel, lumber, and motor vehicles sectors further exacerbate the situation. The forest products sector, for instance, has already seen exports decline by roughly 20 per cent since the trade war began. The new tariffs would disproportionately impact targeted sectors such as plastics, electrical machinery, furniture, and home appliance manufacturing, with only 3.7 per cent of total imports of these products coming from Canada.

This makes it easier for the U.S. to switch to domestic suppliers or pivot away from Canadian products. Canadian Manufacturers and Exporters president Dennis Darby expressed concerns over the potential impact on manufacturers' investment decisions, with nearly three-quarters reporting negative impacts from metal tariffs and one-third delaying or cancelling investments.

Smaller businesses are particularly vulnerable, as they have limited flexibility to adapt to the tariff changes.