Updated ET
OTTAWA—The Canadian government said it would roll out fiscal support to minimize the effects of U.S. tariffs on companies and workers, saying elevated trade-policy uncertainty is already causing damage despite the latest White House reprieve.
Officials said Friday the government would make available 6.5 billion Canadian dollars, equivalent to $4.6 billion, in financing to help affected companies.
The bulk of the financing—about C$5 billion—is to help exporters find new, non-U.S. markets in which to sell their goods, in a program administered by the state-owned export-credit agency, Export Development Canada.
The remaining C$1.5 billion would be available through what officials call favorably-priced loans, and financing for Canadian farmers.
Canada is also making changes to its jobless-benefit plan, which makes payments to workers who lose work. The changes would help employers keep workers while reducing their hours because of trade disruption.
Just minutes before officials spoke to reporters on these measures, President Trump said he might impose fresh tariffs targeting Canadian dairy and lumber products, perhaps as soon as Friday. On Thursday, Trump issued another one-month reprieve on 25% tariffs targeting all Canadian nonenergy imports entering the country.
Canada to commit C$6.5 billion in financing to offset the effects of U.S. tariffs. Photo: geoff robins/AFP/Getty Images
Canadian Employment Minister Steve MacKinnon said the government was rolling out these fiscal measures despite the latest reprieve. “We know that uncertainty in many ways is worse than the proposals themselves, because businesses are frozen in their investment decisions and other issues.” Business executives are deferring investments, halting hiring plans, and considering moving operations to the U.S. to deal with hefty U.S. tariffs.
He said the Liberal government is “taking a calibrated response to address the uncertainty and damage this trade war brings and the risks it is creating for our businesses, our workers and all Canadians.”
MacKinnon, though, played down chatter that the government’s fiscal response on tariffs would be akin to the fiscal firepower it unleashed during the Covid-19 pandemic. As bad as the fallout from hefty tariffs might be, MacKinnon said, “this would not be a Covid situation. It would be a different situation, and we believe that it would be a more slow, rolling economic impact.”
Economists at Desjardins Group said this week they believe the federal and provincial governments, combined, have the fiscal capacity to deliver up to C$200 billion in economic support.
The Trump administration tariffs, should they materialize, would throw Canada into a recession.
The Bank of Canada—expected to cut its policy interest rate next week—has warned that a prolonged U.S.-Canada trade conflict would cause “severe” disruption to the economy, and likely lead to a 3% decline in economic output over a two-year period.
