The intensifying tariff war between Canada and the United States could permanently alter cross-border trade, signalling the potential end of an era of expanding economic ties between the countries, experts say.
New tariffs and the increasing unreliability of the U.S. as a trading partner is prompting many Canadian companies to seek out different markets and set up new trade deals, prominent U.S. investment strategist Peter Schiff said in an interview.
“To the extent that over the next few years other relationships are established, they may not be so easily unwound,” said Schiff, chief economist and global strategist at Euro Pacific Asset Management. “It could permanently impact the overall volume of trade.”
While profit-seeking companies will continue trading across the border when feasible, he said the more that businesses are forced to find new markets, the more attractive those markets will become.
“As Canadian companies end up having to invest more in logistics or infrastructure to service other markets, it may be more lucrative to pursue those relationships,” Schiff said.
The shift away from the U.S. could become even more pronounced if the U.S. dollar weakens, making south of the border even less attractive as a trading partner, he added.
“Americans are not the only buyers,” Schiff said. “We’re just the most convenient buyer because stuff doesn’t have to travel very far to get here. But those Canadian companies can find other customers and look for trading relationships with other countries.”
Canada has long favoured the U.S. as a key trading ally.
For decades, the two countries have signed successive trade pacts that steadily reduced barriers and increased economic integration.
But the period of deepening ties may have passed its zenith and be headed for an enduring, structural shift, according to Drew Fagan, professor at the University of Toronto’s Munk School of Global Affairs and Public Policy.
“There’s going to be lasting change,” he said. “The permanence isn’t just because of the tariffs that were imposed. It’s also a change in mentality and a United States that’s more protectionist and more nationalist.”
Canada’s historical reliance on the U.S. was grounded in both convenience and shared values, Fagan said.
“There’s good reason why we were so dependent on the U.S. market,” he said. “The U.S. is close, it’s large and the cultural ties are deep.
“Although the U.S. is super competitive, there was opportunity there. Now some of that is going away. But there are also plenty of ties that will continue.”