Experts say lifting countertariffs will help lower the cost of some food products.DARRYL DYCK/The Canadian Press
The federal government’s decision to lift most retaliatory tariffs on American goods is expected to deliver some relief to consumers, although experts watching the trade war say the “buy Canada” movement may continue to limit demand for U.S. products.
Prime Minister Mark Carney announced on Friday that Ottawa will mirror U.S. tariffs by only imposing them on goods that are not compliant with the United States-Mexico-Canada trade agreement, which he said was designed to reset trade negotiations with President Donald Trump. The change will take effect on Sept. 1.
Countertariffs on steel, aluminum and the auto sector will remain in place.
The federal government imposed countertariffs on $30-billion worth of goods in March in response to Mr. Trump launching a trade war against Canada.
While the move was meant to push back on U.S. tariffs, businesses warned that consumers would be on the hook for the higher costs. Loblaw even began labelling U.S. products affected by tariffs with a “T” to indicate to consumers which goods have been affected by the countermeasures.
Although the impact of Canada’s retaliatory tariffs on consumers has been limited so far, analysts and industry representatives say lifting them will help lower some costs, including some food products.
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BMO chief economist Douglas Porter said tariffs have had a moderate effect on inflation, in part because the federal government was selective in its retaliatory tariffs so as to minimize the impact on consumers. Ottawa also provided Canadian companies with a slew of exemptions to the countermeasures it imposed.
“Canada was never going to have this massive impact of tariffs, because a lot of what we import comes from other countries that were not subject to tariffs, and even some of the things that come from the United States were not being tariffed,” said Colin Mang, an assistant professor of economics at McMaster University.
But consumers who are reliant on American products or who have limited options in their communities may feel more relief from the decision to scrap the countertariffs.
Gary Sands, senior vice-president of public policy and advocacy for the Canadian Federation of Independent Grocers, said rural and Northern communities, which are frequently served by independent grocers, have been particularly affected by Canada’s countertariffs.
“This is going to be a relief for consumers. There’s just no doubt about that. And we’ll be able to pass that on immediately,” Mr. Sands said in an interview.
“I’m always sensitive to the rural and remote communities, because I know costs are much higher there, and they tend to get overlooked a lot.”
Mike von Massow, a professor at the University of Guelph’s Ontario Agricultural College, said it will take time for consumers to see prices fall after Canada lifts its retaliatory tariffs.
However, Prof. von Massow said grocers are likely particularly sensitive now about how they price products, given the widespread criticism they faced in recent years over food inflation.
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In a post online, Loblaw welcomed the federal government’s announcement, and vowed to be transparent about the evolution of prices, noting that it will keep signage on products that continue to be affected by tariffs.
“Prices will come down over time, as we sell-through inventory that was purchased based on tariffed pricing,” Loblaw said on its website.
Metro CEO Eric La Flèche said in a recent earnings call that about 20 per cent of the price-increase requests the grocer has received from suppliers were linked to tariffs.
Stephanie Bonk, a spokesperson for Metro, said in a statement that “it is too soon to tell” what the effect of lifting retaliatory tariffs will have on prices.
Mr. Trump’s trade war against Canada and suggestions of annexation have already prompted many consumers to boycott U.S. products and to support local goods instead.
Prof. von Massow said Canadians’ preference to buy domestic products may continue to depress U.S. sales in Canada, even after retaliatory tariffs are lifted.
“If people continue to say, ‘well, we don’t want to buy American,’ then we might not see those imports come back up again a whole bunch,” he said.
Mr. Sands said independent grocers have felt the shift in preferences among consumers in favour of Canadian products. He expects that even as Canada lifts its tariffs on the U.S., the trade strife will have a lasting impact on supply chains.
Meanwhile, Canadians still risk seeing higher prices for some goods because of the U.S. trade war, even as Ottawa lifts its countermeasures.
That’s because multinational corporations may choose to sprinkle the added costs they’re facing from U.S. tariffs on consumers in all countries.
“The one area where I think it’s been pretty clear that that’s happening is in auto prices,” said BMO’s Mr. Porter.
“Because U.S. tariffs are hitting almost every vehicle coming into the U.S., the way the multinationals are dealing with this, is not passing that all on to U.S. consumers, but sort of spreading the price increases out . . . around the world.”