Canada Announces C$6.5 Billion to Mitigate U.S. Tariff Impact

The Canadian government has announced fiscal measures aimed at countering the negative effects of U.S. tariffs impact on Canadian businesses and workers. Despite a recent reprieve from the White House, officials have acknowledged that heightened trade-policy uncertainty is already inflicting harm.

C$6.5 Billion in Financing for Affected Companies

On Friday, government officials announced C$6.5 billion ($4.6 billion) in funding for companies facing disruptions. C$5 billion will support exporters expanding into non-U.S. markets. Export Development Canada will manage this program. The initiative aims to help companies navigate challenges and grow internationally.

Loans and Assistance for Farmers

The remaining C$1.5 billion will provide favorable loans and aid to Canadian farmers facing trade conflict challenges. This support aims to alleviate economic strain caused by trade barriers. Farmers will receive assistance to navigate market uncertainties. The initiative seeks to mitigate the financial impact of the ongoing trade issues.

Revised Unemployment Benefits to Assist Workers

Canada is revising its unemployment benefits to support workers impacted by trade disruptions. The revision encourages employers to retain staff. It also aims to help workers who lose jobs due to trade disruptions. The program encourages employers to reduce working hours rather than lay off employees.

Trump’s Threat of Additional Tariffs Looms

Just before the announcement, President Trump hinted at imposing further tariffs on Canadian dairy and lumber products. These tariffs could take effect as early as Friday. Furthermore, Trump granted a one-month extension of the 25% tariffs on all non-energy imports from Canada, continuing the pressure on the Canadian economy.

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Government Acknowledges the Damaging Impact of Uncertainty

Canadian Employment Minister Steve MacKinnon emphasized the government’s proactive approach to mitigate the effects of trade uncertainty. “We understand that uncertainty is often more damaging than the proposals themselves because it paralyzes businesses,” he said, highlighting that companies are already delaying investments, halting hiring plans, and considering relocation due to the ongoing trade conflict.

Not a Repeat of the COVID-19 Economic Impact

While MacKinnon acknowledged the severe consequences of these tariffs, he downplayed comparisons to the fiscal response implemented during the COVID-19 pandemic. “This is not a Covid scenario,” he stated, noting that the economic impact of the tariffs will be slower and more gradual, unlike the sudden and sharp disruption caused by the pandemic.

Potential Recession and Economic Slowdown

Economists at Desjardins Group have projected that Canada’s federal and provincial governments can offer up to C$200 billion in economic support. However, if the U.S. tariffs go into effect, experts warn that Canada could face a recession. The Bank of Canada has also raised alarms, warning that a prolonged trade conflict could result in severe economic disruptions, including a 3% contraction in GDP over the next two years.