(Bloomberg) -- Canada needs to safeguard its relationship with the US but will have to retaliate in a “smart, targeted manner” if the Trump administration puts broad tariffs on imports, said Bennett Jones LLP, the Canadian law firm that’s now home to former central banker David Dodge.
Trump’s agenda — including 25% tariffs, tax cuts and deregulation — will damage business and consumer confidence in Canada, potentially reducing real economic growth by 0.6 percentage points next year and 0.5 points in 2026, the firm said in its economic outlook for the coming year. Report authors added the loonie may fall to 70 cents on the dollar by the end of next year.
“We emphasize it’s essential that businesses and governments focus on the opportunities for generating growth and not succumb to inaction due to uncertainty,” Dodge said during a presentation on the outlook on Wednesday.
Prime Minister Justin Trudeau said his government will respond if Trump imposes tariffs, pointing to the success of retaliation when tariffs were put on Canadian steel and aluminum in 2018. Canada’s provincial premiers met with Trudeau Wednesday and are helping to assemble a list of possible retaliatory measures.
“Retaliatory tariffs or other measures should be targeted strategically to inflict maximum political pain in the United States (in some cases localized) with the least collateral damage to Canada,” the outlook report said.
Canada should consider how to soften the effects of tariffs on exporters and workers, such as additional trade assistance and unemployment benefits. All levels of government should begin developing measures now so they can be quickly rolled out, the report added.
Dodge, who serves as senior advisor to Bennett Jones, co-wrote the outlook with former Bank of Canada Deputy Governor Paul Beaudry and other members of the public policy group at Bennett Jones.
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