THUNDER BAY — A Northern Ontario economist says Donald Trump's threat to impose a blanket 25 per cent tariff on imports from Canada should come as no surprise.
"It's to be expected. President Trump is a very transactional type of president," said Livio Di Matteo, a professor of economics at Lakehead University. "I think what he's basically doing is taking out an opening bargaining position, to deal with both Canada and Mexico."
Di Matteo said Trump is using tariffs to make his point about border issues even though those issues involve Mexico to a much greater extent than Canada.
On social media, the president-elect said Monday evening he would slap a new tariff on all products from both countries on his inauguration day, Jan. 20, 2025, unless their governments curb the flow of drugs and migrants across their borders.
"He's staked out this position of 25 per cent tariffs, and basically you're going to have to negotiate with him as to where you want to go next," Di Matteo said. "He could change it again. In a few weeks, you'll find out he wants a 40 per cent tariff, or maybe he'll go down to 15 as a concession to build goodwill."
About three-quarters of all Canadian exports go to the U.S.
Di Matteo said "That's a substantial chunk of our economy. If you do bring in a 25 per cent tariff, given the way our economies are integrated, it's gonna have quite the impact on the Canadian economy. You're looking, probably, at a two to three per cent drop in GDP over a year or two."
Locally, he said producers such as Thunder Bay Pulp and Paper would be impacted, as well as other companies in the forest sector.
"Lumber is already involved in this ongoing softwood lumber dispute with the Americans. This is just another tariff on top of the charges they're already paying for."
But there would also be serious consequences for the U.S.
"It's certainly going to disrupt auto manufacturing, which means American jobs. The Americans also take a lot of our petroleum products. We are our biggest exporter to them. If they want to tax petroleum and raise the price of their gas, that's their prerogative but it will hit the American consumer quite heavily," Di Matteo said.
He's optimistic Canada will make a strong case that a 25 per cent tariff is not in the best interests of the U.S.
"They are going to have to backtrack, and they're obviously looking for some type of concessions from us, whether they are trade-related or border-related, and so we will have to come up with solutions that will meet their needs also."
Charla Robinson, president of the Thunder Bay Chamber of Commerce, agreed that Canada needs to send a clear message to the new U.S. administration about the harm the tariff would cause to both countries.
"Canada's been kind of the nice guy. 'Let's get along,' that's been our approach previously. But perhaps this time it's got to be a little bit of a stronger stance, that 'you need us as much as we need you' in many of the economic sectors."
Robinson said numerous area industries that ship to the U.S. including wood and paper products, minerals and others would be damaged.
"What the actual cost to a company in Thunder Bay would be is not yet known. But those industries will be significantly impacted just based on the level of trade we already have in those sectors."
She said she believes the federal government and provincial governments will be united in trying to protect Canadian interests and Ontario interests.
"And we'll continue trying to better understand how we can support local businesses that would be impacted as well, and making sure that information gets through to our elected officials so that they're fully informed as well."
