OTTAWA, ON + WASHINGTON, D.C. (January 28, 2025):
Canada will face “devastating” economic consequences unless it urgently develops new trade policies and strategy.
A new paper, From Trade Wars to Trade Wins: Securing Canada’s Economic Security in the Trump Era by leading economist and public policy advisor Hendrik Brakel, lays out a comprehensive roadmap to shield Canada’s economy and position it for long-term success.
The paper, published by the Macdonald-Laurier Institute and the Center for North American Prosperity and Security, argues that Trump’s tariff threats need to be taken seriously. The old bi-partisan economic orthodoxy that the U.S. was the biggest beneficiary of free markets is long gone and Trump and his top advisors aren’t swaying from their belief that tariffs will energize the economy.
But Brakel explains that Trump’s tariffs will fizzle for five reasons. In simple terms, (1) tariffs are paid by the importer (no matter what Trump says), (2) tariffs will lead to massive inflationary pressure, (3) Trump’s assumption that businesses can easily repatriate to the U.S. is very questionable, (4) tariffs will ultimately hurt U.S. competitiveness by increasing the cost of inputs, and (5) tariffs are a poor source of revenue because of the broader distortion and dampening of markets and productivity they cause.
U.S. tariffs on Canada will fall away when they fail to produce the desired result, and as they ultimately hurt the American consumer, but they may still do a lot of damage along the way. Citing a Deloitte study, Brakel explains that a 25 percent U.S. tariff on Canadian exports could cost the economy $275 billion in GDP by 2030, along with more than 200,000 job losses. “Canada’s current approach is inadequate in the face of these challenges. We need a bold, strategic vision to secure our economic future,” writes Brakel.
To address these challenges, the report offers three core policy recommendations:
1. Fortress North America: Strengthen economic and security ties with the U.S. through mutual regulatory recognition, freer movement of goods and services, and enhanced military co-operation. These measures would solidify Canada’s place in the North American economic and security architecture.
2. Global Competitiveness: Reform Canada’s tax and regulatory frameworks to attract investment, reduce barriers to innovation, and enhance supply chain infrastructure. These steps are essential to making Canada a top-tier destination for global business.
3. Combat Global Trade Abuses: Lead efforts to counter unfair trade practices, particularly from China, while championing a rules-based global trade system to ensure fair competition for Canadian industries.
“This is a once-in-a-generation opportunity for Canada to transform its trade policy,” argues Brakel. “By embracing reform, we can secure our economic sovereignty and ensure a prosperous future for all Canadians.”
To learn more, read the full paper here:
Hendrik Brakel is a director in the Federal Practice at Sussex Strategy Group. Previously, he spent five years on Parliament Hill, first as the Chief Economic Advisor to the Leader of the Official Opposition and later he was promoted to Director of Policy and Parliamentary Affairs. Before politics, Hendrik served as the Chief Economist at the Canadian Chamber of Commerce. Hendrik holds a Master of Public Policy and International Affairs, as well as a Master of Business Administration from the University of Ottawa
For further information, media are invited to contact:
Dagny Pawlak-Loerchner
Senior Communications Officer
613-482-8327 x113
dagny.pawlak-loerchner@macdonaldlaurier.ca
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