Canada’s Elections Will Be The First Verdict On Trump’s Tariffs

Canada will elect a national leader on April 28, 2025, an election heavily influenced by Donald Trump’s decision to impose a 25% tariff on all Canadian imports and his remarks about making it the 51st state. Now, Canada is examining the relationship.

Trump will ostensibly implement his tariffs on Canada to curb illegal immigration and the flow of fentanyl into this country, although the numbers on both counts are nominal. While the neo-colonial comments have enraged our northern neighbors, the tariffs threaten the livelihoods of both Americans and Canadians and, specifically, those tied to the energy sector.

The election’s outcome will have profound implications for both countries. If the current prime minister, Mark Carney, wins, he has promised severe economic retaliations—effectively restructuring their domestic economy and international trade partnerships to minimize American ties. Conversely, if the conservative candidate Pierre Poilievre wins, we can expect a more conciliatory approach.

“Economists almost universally support free trade,” which means “no tariffs, quotas, or any other restrictions on the domestic or international flow of goods and services,” says Kevin Brancato, an economist and senior vice president for TechnoMile, which serves industry and provides cloud platforms. He adds that the tariffs may be a negotiating tactic, not a substitute for the roughly $2.14 trillion collected from income taxes.

His comments came during a virtual press event held by the United States Energy Association, where I participated as a panelist.

The tariffs would adversely affect both Canada and the United States. According to the Canadian Chamber of Commerce, a 25% tariff could reduce Canada’s gross domestic product by 2.6% and cost Canadians $2,000 annually. Inflation could rise to 7.2%, and unemployment rates might reach 7.9%.

The same measures will hurt this country, too, including price hikes, lost jobs, and potentially higher interest rates to dampen inflation—now expected to rise by at least 0.8% and 2.2% over time. Meanwhile, investors are now demanding higher interest rates on Treasury notes, which have long been viewed as safe investments but are now considered risky. All of this could lead to a recession later this year.

Trump Wants To Blame The Federal Reserve

Trump wants to deal with this mess by pressuring the U.S. Federal Reserve—the central bank—to lower interest rates. He’s previously questioned whether Chairman Jerome Powell or Chinese Premier Xi is the “bigger enemy” of the United States, and now says he has the right to fire to Powell. However, tariffs mean higher prices, so the central bank would be hard-pressed to lower interest rates.

Rather than blaming the fed chair for our economic issues, Trump should consider canceling the tariffs. That would require the president to swallow his pride; he can’t ever admit defeat because it is not befitting of his brand. However, The Atlantic points out, Trump loses either way. If he appoints a crony to run the Federal Reserve, investors will flock to the Euro, raising borrowing costs and creating financial chaos in this country.

“The only thing worse than tariffs is uncertainty. Canada’s mood is clear: This is a different era,” and we can’t trust the American government, says Marcum Hislop, CEO of Energi Media, Canada, during the virtual press event. “There’s a sense that this is a rupture. Our products have natural markets in Asia and Europe.”

Manitoba’s Premier Wab Kinew recently announced that Manitoba Hydro will not renew two contracts with Minnesota for the export of 500 megawatts of electricity. This decision is part of a larger strategy to decrease Canada’s reliance on the United States and enhance its energy infrastructure.

Furthermore, Canadian leaders emphasize the need to build an east-west energy transmission system, not one that goes north-south, which is into the United States. Prime Minister Carney has said that the traditional relationship between the United States and Canada is “over,” noting that the east-west integration of his nation’s grid is vital and will allow hydroelectricity, wind, and solar power to flow more easily across Canada.

The tariff regime leaves this country worse off. Beyond those levies, Trump threatens to cut funding for clean-tech research—a move will hinder American leadership, slow domestic innovation, and reduce export potential. Moreover, Europe and China will step in and fill the void. Major clean-tech European producers, such as Siemens, Gamesa, Northvolt, and Vestas, are scaling up and preparing to meet global demand.

The Old Factory Jobs Aren’t Coming Back

Economies evolve, and we’re currently in a green revolution, with digital technologies facilitating this transition. The old factory jobs are gone. The 21st-century economy is here—and it’s not going away, creating jobs in renewable energy, data centers, and artificial intelligence. Fanning the flames of resentment is shortsighted, as is trying to dodge change.

“We’re not talking about enough about this question—where we’re losing the economic innovation we have had in clean-tech for the last 10 years. If that happens, it will shift to Europe,” says Jason Rodriguez, CEO and Co-Founder of Zpryme and Froliq.

“And, the pain in Europe is way higher than in the U.S. to come up with new solutions because of their dependency on Russian natural gas—even the potential dependency on U.S. LNG,” adds Jan Vrins, partner Partner, Clarum Advisors.

The threat of tariffs has already done significant damage to the U.S. economy: The S&P 500 has lost more than 12% in value since Trump first introduced them, while the Dow Jones has fallen by 10%, and the Nasdaq has declined by 19%. That equates to nearly $6 trillion in lost market value. A Bank of America survey of fund managers shows record pessimism toward U.S. assets at 30-year lows.

This begs the question of whether trade surpluses and deficits are a matter of national security or whether Trump should be able to unilaterally enact tariffs because we buy more from other countries than they buy from us. Most economists, not to mention our allies, call this a smokescreen for protectionism.

Economists also say a trade deficit is not inherently harmful and certainly not a threat to national security. The United States is the wealthiest country in the world and, thus, has more money to buy things. It also suggests a strong dollar and more purchasing power. In any case, it generates prosperity wherever the money is spent—dollars that return to the United States when they purchase our goods. However, the language of the statutes is vague, which compels the courts to defer to the executive branch. As a result, Trump can bypass Congress.

But the president can’t ignore the reality—that his policies are creating pain both at home and worldwide. Canada’s national election is a test case, and the outcome will speak volumes.