Derek Friesen says the Canada-U.S. trade war had mostly bypassed his agricultural equipment manufacturing business, save for some products that were hit by an earlier round of 10 per cent duties.
That is, until retaliatory Canadian tariffs on $27.6-billion worth of U.S. goods were announced today.
His Manitoba company, PhiBer Manufacturing Inc., makes agriculture equipment, including dash trailers that are used by large-scale farmers to tend to crops. They’ve long imported the frames for these machines from Iowa, but starting Sept. 8, those frames will be subject to new retaliatory tariffs.
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Friesen says taxing an important and expensive part like that will inevitably drive the sticker price way up.
“Farms can’t absorb another big increase like that,” Friesen said.
He expects these trailers, which make up about 70 per cent of his sales, might no longer be economically feasible to buy or sell in a few weeks’ time.
For some business owners, retaliatory tariffs will bring higher costs, making it harder for some to weather the worsening trade war — even if others are hopeful these new countermeasures could boost their sales within Canada.
Canada will impose tariffs of 15, 25 or 50 per cent on a number of products from the U.S. starting on Sept. 8.
The new levies will impact a variety of goods, including seafood, certain paper products, furniture, apparel, tools and motorcycles. Some of the categories facing the largest tariffs are products made of iron or steel or the raw metals, paper products and machinery and parts.
Bradley Saunders, an economist with Capital Economics, says that based on the list, it seems like the federal government took a targeted approach when deciding what to tariff.
“The majority of these goods have been picked as they have readily available domestic alternatives, in an effort to hurt American businesses while minimizing the hit to Canadian consumers and industry,” Saunders wrote in a note on Tuesday.
He said the countermeasures would be relatively insignificant in the big picture, only giving a slight boost to inflation, while government support measures for businesses could offset about half of the possible drag on business growth.
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According to another read of the numbers by University of Calgary economist Trevor Tombe, nearly three quarters of the counter-tariffed items are industrial supplies or things used to manufacture other goods — costs that would be felt more by businesses rather than consumers.
But for some businesses like Danby Appliances based in Guelph, Ont., the new tariffs could even help a little.
Danby owner Jim Estill says some of the parts his company uses will now face higher prices because of the retaliatory tariffs — for example, some of the cables used in their snowplows will now be subject to a 15 per cent tax under the new rules.
Estill says those added costs are manageable for him. And retaliatory 25 per cent tariffs on things like refrigerators could actually make his Canadian-made products a more competitive option for consumers in this country compared to those brought in from the U.S.
“So we may gain a little bit of market share,” he said. “It’s a double-edged sword.”
But the counter-tariffs will still likely hurt more than they help, Estill says — especially if the trade war causes customers to hold off on making big purchases, like a new fridge.
Simon Gaudreault, chief economist at the Canadian Federation of Independent Business (CFIB), agrees that the retaliatory tariffs are mostly bad news for Canadian business owners.
CFIB data shows that there are about two businesses that import components from the U.S. for every one that exports finished products south of the border, which means retaliatory tariffs can pose a larger threat to Canadian businesses.
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“Our economy is based on two-way trade. So now, on top of those export tariffs that the U.S. is putting on our shoulders, we are also putting counter-tariffs on our own shoulders,” Gaudreault said.
While many of those measures were later suspended, Gaudreault worries fresh ones will have a similar effect and says he’s concerned that business owners won’t have the capacity to withstand another shock like this.
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He’s also not optimistic that new support measures will do much to help.
Along with announcing the retaliatory tariffs, the federal government said it would create a $7.5-billion support package for businesses and workers affected by the trade war.
Some of that will go toward enhanced employment insurance measures, while $1.5 billion will be set aside for medium-sized businesses to access through regional development agencies, and millions more will go toward grants and interest-free loan programs.
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Gaudreault says those programs are “unfortunately similar” to past programs the government has used to try to stimulate businesses earlier in the trade dispute.
He says only one per cent of the CFIB’s membership used them, largely because they had certain requirements — like requiring $2 million in revenue in order to access supports — that prevented small business owners from applying.
And while that particular threshold was lowered to $1 million in Tuesday’s announcement for a certain program, Gaudreault still worries the measures will miss lots of businesses.
Friesen says the only thing that will really help is an end to the trade war.
“We just need this to be resolved,” he said.
