A recent tweak to metal tariffs by the United States has extended the reach of its punishing penalties from a single sector to much of Canada‘s manufacturing heartland.
According to the Desjardins Group, economists led by Hendrix Vachon, the change that took effect April 6 has “flown under the radar” due to other political news, but its impact is being felt by companies in Canada‘s manufacturing heartland, particularly in Ontario and Quebec.
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Manitoba, which exports several metal products to the United States, will also be affected by the change, which applies a 25 per cent tariff to the whole product, rather than just the metal content.
This change has raised the cost of exports substantially, with BRP Inc., the maker of Ski-Doo, being one example of a company affected, having withdrawn its financial outlook for the fiscal year of 2027 due to the tariff change, which is expected to cost it $500 million.
Tariff Change Impact
The change has broadened the scope of the tariff from the metals themselves to a wide range of products, with Quebec estimating that a quarter of its exports are now subject to sector-specific tariffs, resulting in an effective tariff rate of 9 per cent, double the Canadian average of 4.2 per cent.
Ontario‘s effective tariff rate has climbed to 6.7 per cent, with the extra burden coming to provinces already struggling under Trump‘s tariff regime, which has seen exports from Ontario drop, especially in the auto sector.
Passenger vehicle exports from Ontario are down over 46 per cent, and rolled steel products have dropped more than 60 per cent, with southwestern Ontario and the regions of Chaudière-Appalaches and Centre-du-Québec in Quebec expected to be hit the hardest.
About 170,000 people work in Quebec industries affected by the tariff change, and about 300,000 in Ontario, with the change threatening to erode the efficiency of the Canada-U.S.-Mexico Agreement.
Aid Package
The federal government has announced a $1.5 billion aid package for affected manufacturers, with $500 million going to the existing Regional Tariff Response Initiative, and $1 billion for financing through the Business Development Bank of Canada.
The aid package is intended to help companies affected by the tariff change, but economists do not think it will majorly weaken the Canadian economy as a whole, although it could prolong the country’s slowdown and make it vulnerable to shocks.
In Room 103 of the Parliamentary building, officials were discussing the implications of the tariff change at 9:45 a.m. on Monday.
The change has been met with concern from companies and economists, who are worried about the impact on Canada‘s manufacturing sector and the broader economy.