The 2025 U.S. Tariff War on Canada: Impact on Alberta’s Economy

On February 1, 2025, US president Donald Trump announced a 25% tariff on all imports from Canada and Mexico, with the exception of Canadian energy exports, which will face a 10% tariff. These tariffs were set to take effect on February 4, 2025, and this afternoon, Canada gets a 30-day reprieve after Trudeau agreed to border security measures in a call with Trump. The tariffs, if and when implemented, will impact a wide range of goods and industries. This escalation in trade barriers will have significant consequences for Alberta, as our province is heavily reliant on resource exports, particularly oil and gas.

Alberta’s oil and gas industry, a cornerstone of its economy, faces increased costs and reduced competitiveness in the U.S. market, its largest trading partner. The 10% tariff on Canadian energy exports is expected to diminish profit margins and could lead to job losses in the sector. The Calgary Chamber of Commerce has expressed concerns that such tariffs would be detrimental to Alberta’s economy.

In response, Canada has implemented retaliatory tariffs on U.S. goods, including agricultural products, cars, and consumer items, amounting to nearly $15 billion.

These measures aim to pressure the U.S. to reconsider its tariffs but also affect Canadian consumers and industries. The Bank of Canada has noted that such tariffs represent a significant relative price shock for an economy like Canada, with strong trade links to the United States.

The trade war has introduced significant economic uncertainty. Analysts predict potential recessions in both Canada and Mexico, with financial institutions revising economic forecasts and expressing concerns about inflation and growth. The Bank of Canada has highlighted that the risks around the Canadian dollar and other currencies have been amplified due to the uncertainty caused by the threat of U.S. tariffs. In the wake of the tariff announcement, the Canadian dollar saw an immediate drop, plunging by more than 2.5% against the U.S. dollar, reaching its lowest point in over two years. This sharp depreciation of the CAD has added to the economic pressure, especially for industries relying on imports or foreign exchange stability.

This unnecessarily harsh trade war not only threatens the stability of Alberta’s economy but also risks deepening the divide between trading partners who have long enjoyed mutually beneficial relations. The short-term gains expected from these tariffs will likely be outweighed by the long-term damage to workers, industries, and overall economic confidence. The aggressive and unpredictable approach of the U.S. is putting unnecessary strain on Canadian families and businesses, and it’s critical that both governments find a diplomatic solution to prevent further harm.