Trump’s tariff threat has Canada on edge. How could tariff threat impact Saskatchewan?

Brandon Harder/Regina Leader-Post. Minister of Trade and Export Warren Kaeding

Nykole King, Regina Leader-Post

U.S. president-elect Donald Trump has threatened to impose 25-per-cent tariffs on all Canadian goods imported into his country, creating an undercurrent of uncertainty for the domestic economy.

But just how much of an impact could this have on your daily life and the Saskatchewan economy?

The Regina Leader-Post is attempting to answer some of those questions as Canada prepares for a looming trade war with its closest neighbour and most significant import-export partner.

What is a tariff?

Simply put, a tariff is a government-imposed tax on imported goods. Since importers are required to pay this tax — the dollar amount is determined by a percentage of the product’s value — tariffs are viewed as a barrier toward trade.

This can also create a snowball effect.

In some cases, it means that imported products become more expensive, passing the cost on to the consumer. This might lead to people buying less of the product, which can compel producers to curtail production and cut jobs. The exporter might consider lowering the price of goods, but this cuts into profit margins.

Trump has vowed to implement 25-per-cent tariffs on all goods across the board that are imported from Canada and Mexico. He has threatened to do so on his very first day back in the president’s office, which will be Monday.

While it remains to be seen if Trump will follow through on his threat, Canadian observers are bracing for an uncertain outcome.

David Ristovski is an economist with the Conference Board of Canada, an independent applied research organization. He says Saskatchewan has a relatively optimistic outlook, mainly driven by investment into key resource areas like potash and agri-food products. But if prices for those exports go up by 25 per cent, it will be hard on the economy.

“Universal tariffs imposed by the U.S. on Canadian goods would have a negative impact on the Canadian economy,” Ristovski said. “It would be harder for Canadian businesses to compete in the U.S. market, and it would impact exports and production as well.”

Trump previously imposed tariffs on Canadian goods in 2018 during his first term in office, adding a 25-per-cent tax on Canadian steel products and 10 per cent on aluminum. Canada retaliated with its own tariffs on American goods.

Following a year of tumultuous negotiations, those taxes were lifted in 2019.

What is the impact?

Saskatchewan traded with 163 countries in 2023 for a total export value of $49.4 billion, according to data from Statistics Canada. The province’s top trading partner was the U.S. at $27 billion, good for 55 per cent of total export value.

“Any tariff threat, wherever it originates from, is certainly a concern to us,” Minister of Trade and Export Warren Kaeding said in a recent interview with the Leader-Post.

The provincial government has been speaking to its exporters about what the looming tariffs could mean for their businesses.

“It’s just the scope and ultimately to what level they are implemented, if they are implemented at all,” continued Kaeding. “There is a lot of unknown right now so everyone is just cautiously optimistic that cooler heads are going to prevail but we just need to prepare ourselves for what this might look like.”

Saskatchewan appears to be less reliant on the our southern neighbour compared to much of Canada. Data shows only Newfoundland and Labrador (37 per cent) and British Columbia (54 per cent) have a lower percentage of trade value to the U.S.

The Saskatchewan Trade and Export Partnership (STEP) is a non-profit organization that has been working with exporters to make their U.S. trading partners aware of the ripple effects that tariffs could have on industries.

Chris Dekker, CEO of STEP, has talked to exporters in the province who tell him they are “extremely concerned.”

Despite those concerns, Dekker noted that trade could still continue even with a 25-per-cent tax, noting that some required goods might not be available to Americans through their domestic market — at least not in the same volume, time frame or quality as products that can be sourced from Canada.

Most of Saskatchewan’s export economy relies on natural resources and agriculture. The Saskatchewan Chamber of Commerce estimates that Trump’s tariffs could shrink Canada’s gross domestic product (GDP) by 2.6 per cent, equivalent to $2,000 per person. The hit to the U.S. economy is forecasted to be 1.6 per cent, equivalent to $1,300 per person.

Chamber CEO Prabha Ramaswamy said retaliatory tariffs could “disproportionally impact Saskatchewan” because of the province’s key exports of crude oil, potash, grain and uranium.

Diplomatic relations

Diplomacy is an important tool as provincial governments work with American states to discuss tariffs and how they could hamper key industries.

Speaking at a recent news conference about border security, Premier Scott Moe cited the need to negotiate exemptions with our American neighbours.

“Carveouts would be everything,” Moe said. “That’s what we’re working towards.”

Canada’s premiers are working with the federal government to engage the U.S. on how to avoid tariffs.

A united front is needed, said Kaeding.

“All our provincial leaders and federal government are trying to work together to develop a strategy and a plan to work with the U.S. government and determine what this is going to look like, what can we do to get in front of it, and what we need to do to prevent this from happening,” said the Sask. minister of trade and export

According to Trump, a key area of concern in diplomatic relations with Canada involves tightening border security to limit the movement of illegal drugs and undocumented migrants into the U.S.

The Saskatchewan government announced new border security measures this week, designed at least partially to appease the incoming U.S. administration.

“I would say we share those same concerns,” Kaeding said. “Anything we can do to improve our border security across the country is certainly going to make a big difference, I think, in how President Trump will be approaching us.”

Industry advocacy groups like STEP and Canadian Manufacturers and Exporters (CME) have also voiced the need for diplomatic efforts as they work with key American buyers on how this can impact their businesses.

Crude oil

Saskatchewan exported $11.6 billion worth of crude oil to the U.S. in 2023, according to Statistics Canada. The commodity is the province’s leading export, and it is exclusively shipped to the U.S.

Pipelines in southern Saskatchewan interconnect with others across Western Canada and into the U.S. The oil industry is integrated across North America, with Canadian crude being refined in the Gulf Coast.

“We are taking a product from Western Canada and adding value to it in the U.S. and creating that common benefit for all Americans and Canadians,” noted Moe.

The tariff threat has also drawn attention from five of this country’s largest energy-focused industry groups, including the Canadian Association of Petroleum Producers (CAPP). The groups — representing more than three-quarters of Canadian oil and natural gas production — announced on Jan. 13 that they’re joining forces to prevent the tariffs by working with government and industry counterparts in the U.S.

“Our infrastructure is incredibly interconnected and designed to provide Americans and Canadians with the reliable and affordable energy they need, every single day,” CAPP CEO Lisa Baiton said in a media release. “This partnership delivers billions of dollars in value to both economies while keeping energy costs lower for American business and consumers. We must do everything in our power to protect this partnership.

“However, Canada must also wake up to the reality that we need to diversify our global customer base, not just for energy but for all Canadian products, to build a more prosperous and resilient economy.”

Potash

Canada provides around 80 per cent of the U.S.’s potash imports, according to Saskatoon-based Nutrien, one of the world’s leading potash producers.

In 2023, Saskatchewan exported $4.9 billion in potash to the U.S. out of $11.5 billion exported globally by the province. Saskatchewan’s main potash producers are Nutrien, Mosaic, and K+S Potash Canada, with mines scattered around the province.

“Whether it’s the products that go into producing a crop or the crops themselves, the agriculture industry requires free trade and accessible markets,” said a Nutrien spokesperson via email.

“We support diplomatic measures fostering cooperation and remain hopeful for constructive dialogue between Canada and the United States.”

Nutrien added that the company cannot speculate on what manner of tariffs might be imposed and whether products such as potash could be exempt.

Canola and crops

Following Trump’s tariff announcement in November, an immediate aftershock was felt through the fall of crop prices. Despite a subsequent rebound, the Agricultural Producers Association of Saskatchewan (APAS) is still waiting to see the full effect of what could come.

“It’s in everybody’s best interest to avoid these tariffs,” said APAS president Bill Prybylski. “It’s a lose-lose situation from the agriculture perspective.”

Refined canola oil from Saskatchewan to the U.S. totalled $2.5 billion in 2023, accounting for 93 per cent of all Saskatchewan canola oil exports. Canola meal and crude canola oil combined were almost $1.3 billion in 2023, with 71 per cent being sent to the U.S.

Oats, wheat and other agri-food products follow close behind as some of the province’s top exports to the U.S. market.

Prybylski has “grave concerns” about how Saskatchewan farmers might be hit hard by tariffs. However, he noted there are some financial tools to help them mitigate their risk, including contracts that predetermine the price for a future date.

Uranium

The energy-producing metal accounted for $375 million worth of provincial exports to the U.S. in 2023, good for 20 per cent of the total volume exported. Germany and the United Kingdom are the top destinations.

Cameco, a uranium producer headquartered in Saskatoon, said it is still unknown how the sector will be impacted by potential tariffs.

“We are following this issue closely, however it is too soon to discuss any specific course of action,” said a company spokesperson via email. “Canada and the United States have a long-established, positive commercial relationship in the civilian nuclear sector that has spurred economic growth and increased energy security.”

Cameco, which has uranium mines located mostly in northern Saskatchewan, said the U.S. “needs a secure western supply of uranium.”

“The hope is that unencumbered trade in nuclear goods and services between Canada and the United States continues, allowing our countries to support each other in achieving prosperity,” said the company.

Manufacturing

There are around 1,000 manufacturers in Saskatchewan that employ roughly 32,000 people. The companies produce things like motor vehicles, agricultural equipment and advanced technologies, totalling a combined seven per cent of provincial GDP from manufactured exports.

Terry Shaw is a regional vice-president for the Prairie branch of CME, a trade and industry association. He says manufacturers on both sides of the border are interdependent, with components crossing the border for assembly into a finished product.

Shaw said the uncertainty of whether these tariffs will be implemented is “damaging” for businesses.

“If industry is uncertain about what is coming tomorrow, how can they engage in business planning, budgeting, production scheduling and, if they are a manufacturer, their raw material purchases?” he asked.

A national survey conducted by CME with its membership found some Canadian manufacturers are taking pre-emptive measures to mitigate risks. That includes accelerating shipments to the U.S. ahead of the tariffs, postponing planned investments or implementing hiring freezes.

New markets

Saskatchewan has nine international trade and investment offices located globally, with a mandate to strengthen the province’s exports to new and established markets.

Dekker said strengthening trade with other markets could help exporters if they cannot be competitive in the U.S. market.

“If we lose our market with the U.S., where else can we go?” he asked. “We have a number of other free trade agreements. It’s a little bit more long term but it’s something we’re looking at as we speak.”

Dekker cited existing trade relationships with the European Union, South Korea, Indonesia and the Trans-Pacific Partnership between 11 other Pacific Rim countries.

Besides the U.S., the main markets for Saskatchewan exports in 2023 were China ($5.5 billion), Brazil ($2.5 billion), India ($1.3 billion) and Japan (just over $1 billion), according to data from Statistics Canada.

However, the Saskatchewan Chamber of Commerce says one of the solutions to the U.S. tariff threat would be to look domestically.

If current inter-provincial tariffs of 6.9 per cent were dropped, the chamber estimates it could add between $50 billion and $130 billion annually to the Canadian economy. That translates to $7,500 per household.

— with files from Alec Salloum

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