Preparing Canadians for Potential Tariffs and Price Increases

With concerns increasing regarding the possible impact of tariffs from U.S. President-elect Donald Trump on Canada, economists warn that Canadians should get ready for rising costs due to ripple effects if these tariffs come into effect.

This week, Trump hinted at imposing large tariffs on goods imported into the U.S. from Canada and Mexico beginning on his first day in office. He emphasized wanting to address issues related to border security and drug trafficking.

If these tariffs are implemented, part of the impact on Canadians would stem from their effect on the Canadian dollar. Stephen Tapp, chief economist at the Canadian Chamber of Commerce, mentioned that tariffs could lead to a depreciation of the Canadian dollar, resulting in increased costs for consumers.

For instance, if someone plans to travel abroad, a weaker dollar could make their trip costlier. Even if you’re staying in Canada, many products we import, including grocery items like fruits and vegetables, could see price hikes if the dollar continues to decline.

Shortly after Trump’s announcement regarding tariffs, the Canadian dollar fell to 71.01 cents USD, its lowest mark since May 2020, although it rose to 71.37 cents USD a few days later.

Consider Buying Major Purchases Now

In light of the “uncertainty” surrounding these tariffs, some Canadians might be wondering whether they should rush to make certain purchases now or wait. Tapp advises against a frenzied approach to buying products since the details about Trump’s proposed tariffs—and whether they will actually take effect—remain unclear.

However, there are products that could be more sensitive to price increases due to tariffs, including vehicles. Flavio Volpe, president of the Automotive Parts Manufacturers Association, pointed out that a significant portion of vehicles produced in Canada comes from American companies, along with many components sourced from the U.S.

If a 25% tariff were to be applied to these components and materials, economist Tu Nguyen from RSM Canada LLP indicated that car prices could skyrocket. The current North American supply chain relies heavily on smooth transportation of goods between the U.S., Canada, and Mexico. If that flow is disrupted, it could lead to significantly higher car costs.

Expect Price Increases on Major Appliances

Major appliances may also be affected by price increases. Nguyen stated that tariffs often target key materials like steel, aluminum, and energy, which are essential to making appliances. While Tapp mentioned it’s hard to predict specific price hikes right now, he acknowledged that based on past experiences during Trump’s first term, it’s certainly plausible.

Avoid Hoarding Supplies

Both Nguyen and Tapp warned against stockpiling everyday items like food and clothing as a way to shield against potential tariff impacts, especially as the future of the tariffs remains uncertain. Nguyen noted that while it may be sensible to purchase durable items that need replacing, regular grocery items can typically be bought when needed.

“Having a pantry stocked with flour or toilet paper may provide peace of mind, but in the long run, it might not be that helpful beyond a psychological boost,” Nguyen said. “Prices may rise a bit in the future, but there will still be items available for purchase when necessary.”

Tariffs, Economy, Prices