Economists warn the duties could shave growth and stall hiring into 2027
Canadian companies that spent much of the past year and a half largely untouched by the trade war now face 50 percent US tariffs on roughly $28bn of annual exports.
The new duties, which US President Donald Trump signed on Monday and which take effect August 19, threaten to freeze business investment and slow hiring more than they dent overall output, economists said.
The Canadian Press reported that the measures will hit about five percent of Canada's exports to the United States, or the equivalent of 0.8 percent of gross domestic product, according to Robert Kavcic, a senior economist at BMO.
The tariffs could shave two to three tenths of a percent off growth in both 2026 and 2027, Bartlett, Desjardins' deputy chief economist, told the Associated Press, though he ruled out a recession.
They would "keep more investment on the sidelines" and "probably suppress hiring," he said, and drag on consumer activity and residential investment.
Unlike earlier rounds, the latest tariffs carry no exemption for goods that comply with the Canada-US-Mexico Agreement, known as CUSMA, which had shielded most Canadian exporters.
Trump used Section 338 of the Tariff Act of 1930, a provision that lets the president impose duties of up to 50 percent on countries found to discriminate against American commerce.
That erosion of the CUSMA shield worries economists more than the direct hit.
The economy could absorb the tariff level overall, Kavcic wrote in a note to clients, though some businesses and industries would be hit "extremely hard." Breaking the CUSMA "shelter" would "do serious further damage to business confidence," he added.
Business confidence is the "key channel" to watch, Mendes, Desjardins' head of macro strategy, told the Canadian Press.
The current "phase of uncertainty" for businesses, he said, carries knock-on effects for households worried about their jobs.
Manufacturers report the same anxiety.
Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, said 73 percent of the group's members expect a failure to renew CUSMA to lower their confidence and future expectations for their companies, according to BNN Bloomberg.
He told the outlet the round marked the first time Washington had applied tariffs to a broad range of previously duty-free items, including chemicals, plastics, paper, cosmetics, and wine.
The reach into consumers' pockets could deepen the drag.
Matthew Holmes, executive vice-president and chief of public policy at the Canadian Chamber of Commerce, pointed to a 2025 New York Federal Reserve study finding that 90 percent of the new US tariffs flow to consumers and families, CTV News reported.
"If an eye for an eye makes the whole world blind, a tariff for a tariff is going to make us all a lot poorer," Holmes said.
Mendes said the renewed pressure should give the Bank of Canada room to ease its benchmark interest rate, as per The Canadian Press, noting that inflation data has so far shown little spillover from the Iran war into broader prices.
