Sign in Subscribe
Tariffs

Canadian Economy Holds Up Better Than Expected Amid Tariff Fears

Strategic Insights

— 1 min read

Despite initial concerns of soaring prices, Canadian shoppers have seen only moderate increases in some categories, while others have remained steady or even fallen. The Canadian economy's resilience can be attributed to a combination of factors, including the effective tariff rate, government subsidies, and companies' ability to trade freely through the USMCA.

Key Takeaways:

  • Kitchen and bathroom appliances, furniture, cars, beer, and canned goods saw the biggest price spikes in the months following US President Donald Trump's tariffs on Canadian imports.
  • Prices for cooking appliances, such as stovetops and microwaves, increased by 8.6% on average in May compared to the previous year.
  • However, prices for other household appliances, like vacuum cleaners, fell by 4% on average in June.
  • Grocery prices increased by 2.8% year-over-year in June, with canned soup prices spiking by 8% due to aluminum tariffs.
  • Home improvement and maintenance costs remained relatively stable, increasing by only 1.6% year-over-year in June.
  • Professor Joseph Steinberg attributes the Canadian economy's resilience to the effective tariff rate, which was around 2.4% in June, and suggests that countertariffs have not had a significant impact.
  • Canadian companies, such as breweries, stockpiled inputs earlier in the year, delaying the steepest tariff impacts.
  • As these stockpiled inputs are used up, costs will likely climb significantly, putting pressure on consumers and businesses.

Statistics:

  • Average price increase for cooking appliances: 8.6% (May)
  • Average price decrease for vacuum cleaners: 4% (June)
  • Grocery price increase: 2.8% year-over-year (June)
  • Canned soup price increase: 8% (June)
  • Home improvement and maintenance cost increase: 1.6% year-over-year (June)
  • Effective tariff rate: 2.4% (June)
  • Price increase for passenger vehicles: 4.1% year-over-year (June)
  • Appreciation of the Canadian dollar since January: 10%
  • Fall in oil prices: lower transportation costs
  • Stockpiling efforts by companies: delaying tariff impacts

Sources:

  • [1] Statistics Canada data
  • [2] University of Toronto professor Joseph Steinberg
  • [3] Professor of strategic management at McMaster University François Neville
  • [4] Beer Canada president CJ Hélie
  • [5] Economist and senior analyst at Statistics Canada Andrew Barclay
  • [6] Government data

Read more