U.S. President Donald Trump's latest tariffs are more narrowly focused on Canada's economy than first feared, some economists said Tuesday.
Trump signed a series of executive orders on Monday that would impose a 50 per cent tariff on a range of goods, including honey, liquor, cement and hockey sticks.
There would be no exemptions for goods compliant with the Canada-U.S.-Mexico agreement on trade, which has served as a shield for Canadian exporters in previous rounds of tariffs.
Energy, potash, critical minerals, fish and goods already targeted by the U.S. for Section 232 tariffs are not affected by the latest duties.
A number of economists suggest the new duties will hit around five per cent of Canada's exports to the United States.
BMO senior economist Robert Kavcic said in a note to clients that the proposed tariffs would cover roughly $28-billion worth of annual Canadian exports to the United States. That amounts to 0.8 per cent of the Canadian economy, he said.
Kavcic said it appears that chemicals, plastics, electronics and industrial equipment are the biggest target in the new tariffs, followed by consumer goods and forestry products. Miscellaneous manufacturing machinery and agricultural or food products round out the list.
Canada's current effective U.S. tariff rate — a measure of the average level of duties across Canadian exports — likely would rise by about 2.5 percentage points if these new tariffs came into effect, Kavcic said.
According to that calculation, the new tariffs would bring Canada's effective tariff rate 7.5 percentage points above the pre-trade war level, which was close to zero on most goods.
Kavcic said that number is digestible for the entire economy but some specific businesses and industries will be hit "extremely hard" if the tariffs come into effect as planned on Aug. 19.
"And if the shelter of (CUSMA) is in fact broken, that would do serious further damage to business confidence," he said.
The 30-day window before implementation gives time for de-escalation and legal challenges, he added.
CIBC deputy chief economist Benjamin Tal also said in a note that he sees the new tariffs as a sector-specific story for the economy, not a sweeping threat.
"The timing is also notable, and it is likely these tariffs will serve as additional leverage in upcoming CUSMA negotiations," Tal wrote.
The Trump administration has cited Canada's supply managed dairy industry, provincial bans on U.S. booze and quotas on the American automotive sector to justify the new tariffs.
Picture Courtesy: THE CANADIAN PRESS/Darryl Dyck
