WASHINGTON, D.C. — When U.S. President Donald Trump first proposed tariffs on Canadian goods, many experts predicted dire consequences. They forecasted a three percent decline in Canada’s GDP within seven months, over 100,000 job losses in the auto sector, and inflation rising above three percent, potentially leading to a recession. However, these predictions have not fully materialized. Despite challenges such as rising unemployment and supply chain disruptions, Canada’s economy has demonstrated unexpected resilience in several areas.

Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, stated, “In terms of shock to the Canadian economy, the worst is behind us.” Currently, Canadian exports to the U.S. that do not comply with the Canada-U.S.-Mexico Agreement (CUSMA) face significant tariffs. These include a 35 percent tariff on certain goods, a 10 percent tariff on non-CUSMA-compliant potash and energy, and a staggering 50 percent tariff on Canadian steel, aluminum, and copper exports. Additionally, there is a 25 percent tariff on non-U.S. content in cars and light trucks, as well as on non-CUSMA-compliant auto parts and softwood lumber.

Following Trump’s announcement of tariffs in early February, the Canadian Chamber of Commerce’s Business Data Lab (BDL) analyzed which Canadian cities were most vulnerable based on their reliance on U.S. exports. Saint John, New Brunswick, which hosts Canada’s largest crude oil refinery, topped the list with a 131.1 percent exposure rate. Calgary, a major exporter of crude oil, natural gas, and beef, followed closely. Cities in southwestern Ontario, including Windsor and Kitchener-Cambridge-Waterloo, ranked third through sixth due to their automotive manufacturing focus.

The University of Toronto’s School of Cities has also assessed the potential impact of U.S. tariffs, considering various economic factors. While auto-manufacturing hubs are among the hardest hit, the overall exposure to tariffs has been more varied than anticipated. The most affected areas are primarily in Ontario and parts of New Brunswick, reflecting their dependence on automotive manufacturing, steel, aluminum, and lumber.

DiCapua noted, “I’d say, for the most part, our emphasis on the acute difficulties in southern Ontario have been correct.” However, cities like Saint John and Calgary have shown more resilience due to their energy sector’s lower tariff exposure. Karen Chapple, director of the School of Cities, expressed initial concerns that smaller towns would bear the brunt of the tariffs. Yet, her research revealed significant impacts on larger urban areas as well. “No community in Canada — well, no community of any significant size in Canada (over 20,000 people) — is able to skate free of the tariffs,” she said.

The first three quarters of the year saw notable job losses in manufacturing, particularly in Ontario’s auto corridor. However, some regions and sectors have shown signs of recovery. DiCapua reported a rebound in manufacturing over the last two months, with a 3.3 percent increase in manufacturing sales in September, marking the highest growth rate since the tariffs were announced. Retail sales, projected to reach $649.8 billion this year, are expected to increase by 2.4 percent compared to 2024, defying earlier expectations of a decline.

William Strange, an economics professor at the University of Toronto, noted that the commercial real estate sector has also shown unexpected strength, particularly in industrial properties. “Most people looking at commercial real estate over this year have been pleasantly surprised that there hasn’t been generalized decline post-Liberation Day,” he said.

With approximately 75 percent of Canadian exports going to the U.S., Ottawa is actively promoting trade diversification to mitigate future risks associated with U.S. tariffs. DiCapua highlighted progress in expanding Canadian exports, particularly in oil, natural gas, and agricultural products, to markets in Asia and Europe. However, Canada’s reliance on the U.S. market remains a longstanding issue, with exports to the U.S. decreasing from 83.8 percent in 2005 to 76.4 percent last year.

Chapple expressed concern about the future of CUSMA, stating, “Everybody is nervous that there will be no more CUSMA. How do we deal with that?” She emphasized the need for a significant reduction in dependency on U.S. exports. While the tariffs have not devastated the Canadian economy as initially feared, uncertainty remains. DiCapua believes that businesses can now plan more effectively, as tariff rates are established, allowing for clearer operational strategies.

Despite ongoing tensions, DiCapua remains optimistic about the future of trade relations. “As long as we continue to talk through our differences and challenges, I think there’s a reasonable expectation that we will continue to have some form of agreement in place,” he said. “We have to be optimistic because we need to be.”