Following the latest U.S. election, proposed economic policies are already sparking significant debates, particularly regarding plans to impose sweeping tariffs on imports. While the primary goal of these tariffs may be to reduce the U.S.’s dependence on Chinese goods and boost domestic manufacturing, but the repercussions of these tariffs are likely to ripple across the globe, impacting key trading partners, including Canada. The proposed tariffs, potentially as high as 10 per cent on all imports, could threaten to undermine the economic stability established by the United States-Mexico-Canada Agreement (USMCA), the trade deal that replaced NAFTA in 2020.
Canada’s economy is deeply intertwined with and dependent on the United States, with approximately 75 per cent of Canadian exports directed south of the border. Meanwhile, Canada’s second-largest trade partner, China, accounts for a mere 3.7 per cent. This significant reliance on the U.S. leaves Canada highly vulnerable to U.S. policy shifts and influence. If the proposed tariffs disrupt current trade agreements and patterns, Canada’s GDP could be significantly impacted, with declines ranging from 0.5 to upwards of 5 per cent. This could lead to significant economic damage and a financial downturn that would likely ripple through most major industries nationwide, jeopardizing jobs and government revenues.
The USMCA, a trade deal that replaced NAFTA in 2020, was designed to harmonize trade across North America, especially in critical sectors like automotive manufacturing, where integrated supply chains span all three member countries. However, it has also come with heavy tariffs on Canadian steel and aluminum exports. Unlike NAFTA, the USMCA includes provisions for digital trade, stronger labour and environmental standards, and rules of origin for automotive manufacturing. Broad-based tariffs would likely disrupt these supply chains and raise production costs, eroding the region’s ability to compete with major global players like the European Union and China – a stark reminder that Canada must be prepared for further unpredictability.
On the other hand, countries like Germany offer a valuable blueprint for economic resilience. Germany has managed to maintain a robust domestic manufacturing sector despite the widespread trend among Western nations to outsource to lower-cost countries. Much of this success is rooted in its vocational education system, which combines classroom instruction with hands-on training to produce a highly skilled workforce tailored to industry needs, a component of our curriculum at Computek College that I significantly reinforce. Additionally, Germany’s significant investment in research and development (R&D) and its focus on sustainability and innovation ensure its competitiveness in high-value sectors such as automotive engineering, precision manufacturing, industrial machinery and tech.
Canada is equally well-positioned to capitalize on its strengths, being one of the most educated countries in the world, with nearly 60 per cent of its population obtaining tertiary education. We also benefit from a steady influx of highly skilled immigrants and an abundance of natural resources, from minerals and oil to timber and agricultural products. Yet, Canada has failed to fully leverage these advantages to diversify its economy and reduce its reliance and vulnerability to U.S. policy shifts.
Canada is at a crucial tipping point where it must adopt forward-thinking strategies emphasizing diversification, innovation, and workforce development to protect itself and secure a more resilient future to increase productivity and strengthen its economy. Expanding trade relations beyond the U.S. is a crucial factor. By strengthening ties with other economic powerhouses like China and India, Canada can tap into rapidly growing markets and reduce dependence on a single trading partner. Given Canada’s large immigrant population from China and India, it has the people, knowledge base, and cultural proficiency to navigate various regulatory environments and cultural differences to strengthen these cross-cultural trade relationships. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) offers another opportunity to broaden Canada’s trade networks and enhance economic stability.
Increasing investment in R&D is essential for Canada. Canada allocates just 1.7 per cent of its GDP to R&D, significantly lower than Germany’s 3.1 per cent and the U.S.’s 3.5 per cent. Furthermore, Canada is the only G7 nation where R&D spending as a share of GDP has declined over the past two decades. Canada must foster homegrown industries by increasing government support for innovation and creating tax incentives for small and medium-sized enterprises (SMEs), which often fuel economic growth and technological advancement. Canada also needs to prioritize value-added manufacturing within resource sectors—such as refining minerals domestically rather than exporting raw materials and finding more environmentally friendly solutions, which could help retain more economic benefits.
A renewed focus on vocational education could also bolster Canada’s domestic manufacturing capabilities. Adopting a system similar to Germany’s would ensure Canadian industries have access to a skilled workforce capable of driving innovation and sustaining competitiveness. This would also be a very beneficial way for many immigrants to upskill or have their credentials recognised in Canada. This approach would complement Canada’s strengths, leveraging its abundance of natural resources and exceptional workforce talent and expertise to convert its resources into high-value goods for export, helping to generate more jobs and wealth for Canada and enhancing the competitiveness and value of our economy.
The proposed tariffs should be a wake-up call for Canada to rethink its economic strategy. Canada must reduce its economic reliance on the U.S. to diversify trade partnerships and capitalize on its talent and resources to position itself for long-term economic success. This is not just a defensive move—it is an opportunity for Canada to redefine its role on the global stage as a leader in innovation, sustainability, and strategic economic development. With the right investments and policies, Canada can turn these challenges into a pathway for greater resilience and prosperity, ensuring our economy remains robust and adaptive in an increasingly unpredictable global landscape.
