In this episode of Trump Trade War, The Hub’s publisher Rudyard Griffiths speaks with Alicia Planincic, the director of policy and economics at the Business Council of Alberta, to discuss why Trump’s tariffs would be a bad deal.
To read Alicia’s full analysis, click here.
Key points:
- Related business trade: Over 50 percent of U.S. imports from Canada and Mexico are related business transactions, meaning American companies are trading with their own subsidiaries or affiliates. Tariffs would disrupt these integrated supply chains, making American businesses less competitive.
- Economic pain for the U.S.: Tariffs on Canada and Mexico would be more damaging to the U.S. economy than tariffs on China, due to the high level of integration in North American industries like automotive and energy.
- Retaliatory tariffs would hurt Canada: While retaliatory tariffs might feel justified, they would also harm Canadian businesses that rely on U.S. imports for production, creating a lose-lose scenario for both countries.
Alicia Planincic, an economist with the Business Council of Alberta, joined The Hub to discuss the potential economic fallout of President Donald Trump’s proposed tariffs on Canada and Mexico. Planincic argued that the tariffs would harm not only Canadian and Mexican economies but also American businesses, due to the deeply integrated nature of North American trade. Her analysis highlights the risks of disrupting supply chains and increasing costs for businesses across the continent.
Planincic emphasized that the North American economy is uniquely integrated, with many businesses operating across borders. She pointed to data showing that more than 50 percent of U.S. imports from Canada and Mexico are related business transactions, where companies essentially trade with themselves. “Think about something like car manufacturing, where one part of the production process happens in Canada, another part in Mexico, and another part in the U.S.,” Planincic explained. “Adding a tax or tariff on these imports is really just going to make American businesses less competitive.”
This level of integration is far higher than U.S. trade with China, where most imports are consumer goods purchased by American retailers or individuals. Planincic noted that while tariffs on Chinese goods might align with Trump’s goal of reducing reliance on foreign manufacturing, the same logic does not apply to Canada and Mexico. “In North America, it is just so strongly integrated,” she said.
Planincic also addressed the growing sentiment in Canada for retaliatory tariffs against the U.S. While such measures might feel like a justified response, she warned that they would backfire on Canadian businesses. “The same issues that we’ve talked about for President Trump on the American side would be the case for Canada in reverse if we were to put retaliatory tariffs on the U.S.,” she said. “Ultimately, we are hurting ourselves.”
She explained that Canadian businesses rely heavily on U.S. imports for their own production processes, meaning retaliatory tariffs would increase costs for Canadian companies as well. “This is not just kind of an American thing,” Planincic said. “This is all across North America. We are very strongly coupled and integrated together in ways that are going to be very costly and very challenging to split apart.”
Generative AI assisted in the production of this story. If you are quoting from or referencing this episode, please refer to the audio to verify.
