By Bryan Laprise

Local Journalism Initiative

Canadians are on notice. Cars will cost more, groceries will cost more, the cost of building or buying just about anything will cost more as a result of tariffs and counter-tariffs in the economic standoff with the United States.

The Record spoke to Vivek Astvansh, an associate professor at McGill’s Desautels Faculty of Management to get a better understanding of how the tariff wars have affected the Canadian economy itself.

Astvansh explained that the reasoning behind implementing these tariffs is to “force Canada into action” to stop the entry of fentanyl and illegal immigrants into the United States, decrease Canada’s tariffs on the U.S. to equalize their trade deficit and force Canada to spend its committed 2.5 per cent of the GDP on defence, therefore meeting the NATO defence spending target.

Astvansh laid out the potential consequences of the tariff wars for businesses. With retaliatory tariffs in place in Canada, importers in the country must pay a higher price for goods, making profits drop. So, they increase the price for their consumers (either individuals or other businesses). If consumers have alternative products to choose from, the demands for products with higher prices goes down, which would lead to lay-offs and higher unemployment.

Some companies have decided to shift production to the United States to avoid tariffs. “Instead of having a packing plant in Quebec, they’ll go somewhere else,” he gave as an example.

Because the message coming from the White House about tariffs regularly changes, it creates a lot of confusion. This makes businesses and individuals unsure about how to react and plan accordingly, he added.

The professor claimed that there is no specific data to show the clear ramifications of the impact of tariffs, such as the ones put in place during the first Trump presidency because they are in place for a relatively short time. In 2018-2019, it was 11 months, he said.

This situation is representative of the broader geopolitical conflicts of the modern era. “It’s a new reality of the world, I guess,” commented Astvansh.

It takes a few months to a year for consumers to notice changes in prices, according to the McGill professor, as businesses take time to understand the new situation and make the appropriate decisions for the future.

“I doubt that businesses have clarity on what they should be doing,” he added.

However, one of the most influenceable products is cars, perhaps because of the interconnectedness of the manufacturing industry.

The price of new automobiles goes up because of the “randomness of the tariffs.” Some people may delay their purchase or go to the used market. A large shift like this would increase the demand of used cars, which would consequently increase prices.

As for some Canadians’ boycott of American goods and services, it’s “meaningless,” said the professor, though he “appreciate[s] the sentiment.” Since it’s nearly impossible to cut all ties with American business, which include Amazon, Netflix and Meta, the move is more symbolic as it creates buzz and national pride. 

According to Astvansh, the real solution would be for Prime Minister Mark Carney and President Donald Trump to sit down and clearly talk to work things out. In his opinion, Canada should give in to some of Trump’s demands, as “so many of its goods go to the U.S.,” though it’s also important for the country to diversity its trading partners, such as going to Germany, Japan and the United Kingdom.

If that doesn’t work, rather than boycotts, it would be better for businesses and the Canadian government to directly penalize their American counterparts, such as when Ontario threatened to cut off power, the professor told The Record. This way, the people impacted will go to the White House, which could calm down its actions and rhetoric for the benefit of its businesses.

Astvansh clearly indicated that the problem shouldn’t be between Canadians and Americans themselves, though. “Governments come and go, but the people stay the same. The love and affection should not change,” he said.