What American tariffs could mean for the Fraser Valley

The Fraser Valley’s agriculture and manufacturing industries are anxiously watching as American tariffs loom, fearing an economic “double whammy” from both United States tariffs and retaliatory Canadian policies.

US President Donald Trump confirmed Monday that American tariffs on Canadian goods would go ahead “on time, on schedule.”

The schedule keeps changing, but the Americans seem unwilling to back off previous statements. In early February, Trump announced Canada, Mexico, and China would be subject to 25% tariffs on all goods entering the United States. (The tariffs were set at 10% for energy imports from Canada.) The announcement caused anger and worry in Canada, with Prime Minister Justin Trudeau announcing a series of retaliatory tariffs that would go into effect with the American tariffs.

A day before the tariffs were set to begin, the Americans announced a month-long pause, subject to Canada taking a firmer stance on border control, including hiring a “fentanyl czar.” (Many of the border measures had already been announced in December.) But now the tariffs are back on the table.

If Trump’s “on schedule” comment holds, 25% tariffs on Canadian goods entering the United States will begin on March 4. Other tariffs may follow, and add to the penalty on Canadian exports to the US. Trump has also promised additional tariffs on steel and aluminum that will “stack” on the initial tariffs. Those are set to go into effect on March 12.

If there are no exemptions to the American tariff policy, Canada’s economy would hit a recession by the middle of 2025, the Canadian Chamber of Commerce warned.

The impact would be greater with retaliatory tariffs. Designed to make American businesses feel an economic pinch for their government’s tariff policies, retaliatory tariffs imposed by Canada’s government would also have a negative effect north of the border. The Canadian Chamber of Commerce estimates American tariffs would cost Canadians $1,300 per person, and retaliatory tariffs would raise that cost another $600.

Despite the expected economic hit, Canadian businesses are largely supportive of “dollar-for-dollar” retaliatory tariffs.

In real terms, job losses and price increases are expected across many sectors of the economy. Local businesses may not be able to shoulder the loss of American customers, or the higher price for imported goods hit by retaliatory tariffs.

In short, the implementation of tariffs will mark a “structural change” for the economy of Canada, Bank of Canada governor Tiff Macklem said. Although it is hard to predict the exact economic impact, since Canada hasn’t experienced such expansive tariffs since the 1930s, Macklem said Canada is set for a period of change.

“A structural change is upon us,” he told Ontario business leaders last week. “Increased trade friction with the United States is a new reality.”

Certain communities—including places with economies built around oil, cars, and steel—will be particularly hard hit by the tariffs, according to the Canadian Chamber of Commerce. In general, British Columbia will likely be better off than the rest of Canada. BC’s access to the Pacific means trade relations are already more diversified. The Fraser Valley, however, could be especially challenged by American tariffs.

With 330 companies that export to the United States, Abbotsford-Mission is the most vulnerable BC community, according to an analysis from the Canadian Chamber of Commerce. The Chilliwack area, which has 162 companies that export to the US, is the province’s second-most vulnerable economy.

Although cities closer to Vancouver are expected to be less affected by tariffs, Greater Langley Chamber of Commerce CEO Cory Redekop says that may not be true for Langley. Langley’s economy is akin to Abbotsford’s and tariffs may pose similar challenges, Redekop said.

“Obviously, our manufacturers are most concerned, and Langley has a lot of those, particularly in food manufacturing and processing, which could be hit badly,” Redekop wrote in an email to The Current. “Often they don’t have the margins to absorb a 25% increase in their prices to their American suppliers.”

Redekop said one large food manufacturer in Gloucester had planned to expand into the United States, but that their deals with American grocery chains will likely be impacted if the tariffs go ahead.

“They have major international expansion plans and this will make growth into the USA harder,” he said.

Abbotsford’s Phantom Screens is already adjusting its manufacturing plans in anticipation of declining American demand, the company’s CEO told CBC. The retractable screen-making company has cut its production schedule from five days a week to four.

In the Fraser Valley’s agricultural sector, those same concerns are causing producers to reconsider their future plans.

“We're hearing reports of people really taking a hard look at where they could make some changes, and there might be some longer term benefits that come out as a result of … partnerships that are less volatile,” Danielle Synotte, executive director of the BC Agriculture Council said.

Those “less volatile” partnerships could be within Canada, she said, or externally with other countries. But location matters. Unlike most manufactured goods, agricultural exports come with the additional challenge of spoilage. A desire to ship to more-distant countries can require significant changes to how items are packaged or produced.

“They need to look at diversifying their product that can last, that can have that longer shelf life,” Synotte said. “So they need to kind of look at: ‘If I have a product that's only good for two days, I need to look at something that's going to last longer.’”

Farmers are already examining the profit margins for parts of their business that may be affected by tariffs. They are also looking to see if there are domestic opportunities for their products, although it may be challenging to make that happen, Synotte said.

“Canada is a very big country, but in terms of population and volume, there's not a high demand,” she said.

Fraser Valley growers have already saturated the Canadian market for blueberries, she noted. Nearly all of Canada’s blueberries are grown in the Fraser Valley; in 2020, Canada exported more than 20 million kilograms (roughly $110 million) of fresh blueberries to the United States.

“We've already fed the demand that's here at home, which is why export is so important,” she continued.

Retaliatory tariffs

Tariffs as a whole aren’t new—the US-Canada-Mexico trade agreement signed in 2020 at Trump’s behest has a schedule of tariffs for goods traded between those countries, and Canada has a complex system of its own for goods coming into the country, especially in supply managed industries like dairy.

But for most of the last three decades, the United States and Canada have seen trade barriers reduced, rather than expanded. So the new tariffs are not only far higher and more extensive than previous ones, they also represent a significant shift in government attitudes toward North American trade. They’ve also brought the potential of retaliation.

“What has changed is we didn't have these, this big windfall of counter tariffs come down all at once,” Synotte said.

Retaliatory tariffs could make some businesses particularly vulnerable, depending on what products Canada decides to target. The goal of the tariffs on items entering Canada is to inflict economic pain on American consumers, potentially leading them to demand a retreat from their government’s pro-tariff positions.

In early February, Trudeau announced retaliatory tariffs on a number of products, including alcohol, cigarettes, video game consoles, ammunition, and baby clothes. Canada specifically sought to impose tariffs that could be felt in states that have supported Trump electorally. But Fraser Valley businesses worry they will also bear the economic pains.

“It can be described as a double whammy, emphasizing the co-dependency between the two countries,” Synotte said about the counter tariffs. “That is what my membership is most concerned about, and that is what is different.”

Farmers are particularly concerned about retaliatory tariffs on agricultural machinery and “inputs”—things like fertilizers and feed. Canada’s list of retaliatory tariffs first announced in February would hit products including tractor mowers, electric saws, pneumatic drills, and tires.

The February list of retaliatory tariffs were not centered on products like nursery plants or electronic components. But local businesses are worried about the potential effects should that change.

“I have heard from a lot of businesses which are just as concerned, if not more so, about tariffs on the materials, parts, pieces they bring into Canada from the US as part of their business inputs,” Redekop wrote in an email.

Nurseries could face major issues if Canadian tariffs tax incoming plants, Synotte said. Starter plants from the United States are sent into Canada to be grown in greenhouses, and many of the fully-grown plants are sent back south again for sale.

(The Fraser Valley is home to nearly half of BC’s flower greenhouses and 37% of BC’s nursery-based farms. Canada’s February list of retaliatory tariffs did not include floriculture products.)

There is no crystal ball for how tariffs will affect the Fraser Valley, BC, and Canada as a whole. But as Macklem said during his speech to Ontario businesses last week, structural change will be inevitable.

“We all hope Canada can continue open trade with the United States. A trusted open trade relationship benefits both countries,” he said. “But if we are faced with a prolonged trade conflict, the only way to offset this negative structural change is with a positive structural change.”

The only people who can create positive structural change in the economy, he finished, are elected officials.

American politicians are the only ones who can change how their country uses tariffs on goods entering the US. And whoever leads Canada after the upcoming federal election will have the job of determining how Canada, and the Fraser Valley, responds to those economic challenges.