Canadian consumers will feel the pinch from tariffs, just not right away, economists say

U.S. imports of food products, beauty products, paper products and home furnishings are facing tariffs. Photo by Getty Images

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Canada’s counter-tariffs could add pressure on households amid already rising living costs, but the full impact may not be felt until months from now, economists say.

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The Canadian government released a large list of U.S.-made products that will be subject to counter-tariffs of between 15 and 50 per cent, which will take into effect on Sept. 8 if negotiations don’t resume. The retaliatory tariffs are expected to cover roughly $27.6 billion worth of imports from the U.S. and are a response to U.S. President Donald Trump’s Section 338 levies, which came into effect on Saturday.

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The tariffs do not just apply to manufacturing products such as steel and aluminum, though they take up a majority of the list. U.S. imports of food products, beauty products, paper products and home furnishings were included as well.

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“This is a tax on imports, so we’ll raise prices on imported items and that strains household budgets. That adds to some of those pressures economically,” said Trevor Tombe, director of fiscal and economic policy at the University of Calgary’s School of Public Policy.

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“That’s important in its own right, but can also lead households to then spend less in other areas.”

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Tombe said the direct effects of the tariffs on household budgets will be broad, assuming the tariff costs are fully passed on to consumers.

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According to his calculations, clothing and footwear prices could increase by 3.2 per cent, while prices for food and non-alcoholic beverages could increase by 1.9 per cent. Prices for furnishings and household goods — tableware, kitchenware, chairs and other furniture made of wood or metal — could increase by 6.2 per cent.

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Additional price increases could ripple through elsewhere. For example, since restaurants import some food and alcohol, those costs could be passed down to consumers.

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“So all in all, I estimate one and a half per cent increase in consumer prices across the board. Some higher, some lower,” Tombe said.

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However, immediate price changes post-Labour Day are unlikely.

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Fraser Johnson, an operations management professor at the University of Western Ontario’s Ivey Business School, said price increases as a result of the tariffs will happen gradually over a few months. Most retailers will still have enough inventory in their distribution channels to last them until the end of the year, and any decisions around price increases will depend on market conditions.

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“(Business owners) don’t want to scare consumers off, and usually there’s some kind of a combination between increasing prices and reducing margins,” he said.

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“You don’t know how long the tariffs are going to last, and being too aggressive in terms of bumping up your prices could end up hurting your sales and profitability more than if you took a more gradual approach.”