How should Canadian consumers prepare for a looming trade war? (Hint: Don’t stockpile orange juice)

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Canadians have been flooded with headlines about a looming trade war with the United States, leaving many wondering if the prices of often-mentioned goods – from cars to ketchup – could soon skyrocket. The answer from experts? Some prices might go up, but many unknowns remain and stockpiling or making hasty purchases would be a bad idea.

U.S. president-elect Donald Trump has called tariff “the most beautiful word in the dictionary,” and he has proposed a 25-per-cent tariff on all Canadian imports. In response, Canada is reportedly preparing a list of retaliatory tariffs to enact if Mr. Trump’s plans come into effect, including levies on ceramics – think toilets, bathtubs and sinks – as well as Florida orange juice, plastics and steel.

If the trade war escalates after Mr. Trump’s inauguration on Jan. 20, Canadian consumers could see some price hikes for items such as cars, fridges and washing machines, as well as a number of grocery aisle favourites, with some increases happening sooner than others.

A lot hinges on whether the U.S. strikes Canada with the threatened and sweeping 25-per-cent tariff on all imports or whether there’s a more restrained approach, and how Canada hits back.

For example, Oxford Economics estimated that Canadian consumers could see a 7.2-per-cent rise in the Consumer Price Index by mid-2025 under a 25-per-cent U.S. tariff with proportional retaliation. (These estimates are debated by some experts.)

University of Ottawa Economics professor Bao Anh Nguyen said that, generally, any percentage increase in tariffs results in higher prices for a range of consumer products imported from the U.S.

But prices for Canadian-made consumer products could decrease in the short term. “Consumer products made in Canada would have a smaller market while supply remains unchanged, potentially causing prices to decrease,” he said.

Things get infinitely more complicated when you take into account supply chains and substitute products.

Some goods could be impacted by both the initial Trump tariffs on Canadian goods shipped to the U.S. as well as retaliatory tariffs Canada might levy, said Peter Morrow, an international economics professor at the University of Toronto. “This is because the tariff can make the final good, the car, more expensive, but it can also make companies’ abilities to produce cars more atypical,” he said.

Of the nearly $600-billion in merchandise Canada ships to the U.S. annually, about 80 per cent is intermediary parts and equipment, according to Statistics Canada. If Mr. Trump keeps his word, some experts estimate Canadians could face a spike in prices on a range of goods, from new cars to washers and dryers, in the near future after Mr. Trump is inaugurated owing to supply chains.

Dennis Darby, president and chief executive officer of the Canadian Manufacturers & Exporters, said Canada doesn’t export many “finished products” to the U.S. “Canada is a major supplier of auto parts, machine parts, food, chemicals.”

“If auto parts that are made in Canada are tariffed going into the U.S. for those companies that make cars, when those cars are sold back to Canada, the price would increase because it would have already absorbed a tariff,” he said.

Kitchen and bathroom appliances made with Canadian steel, aluminum and other components could see a price bump from a Trump tariff too.

The second and likely more visible hit to wallets of Canadian consumers would be brought on by Canada’s countermeasures. If the American products targeted by Canada during Mr. Trump’s first term are an indicator, consumers here could see higher prices for American bourbon, coffee, jam, ketchup, mayonnaise, pickles, toilet paper, dishwasher detergent, candles and certain hair products.

A handful of retailers and brands such as Walmart, Stanley Black+Decker and Columbia Sportswear have already expressed the need to bump prices for consumers in recent earnings calls and statements.

In the pharmacy and grocery aisles, Andreas Schotter, a professor of international business at the Ivey Business School, estimated that Canada’s retaliatory measures could push up the cost of sweets, animal and vegetable fats, meat and seafood, while supply chain disruptions could leave Canadians with limited options in essentials such as prescription medications and items that depend on U.S. components.

And then there are the spillover effects. “Even used cars will go up in value again, because when new cars get more expensive, used cars are getting more expensive; it’s a substitute product,” he said.

Despite the potential for higher prices and less options, Prof. Schotter still isn’t making any pre-emptive purchases in response to proposed tariffs.

“I’m not doing it,” he said. “I don’t think we will see shocks across the board. In a lot of countries, consumer sentiments are depressed. People don’t buy anything and if you put that additional price tag, they will buy even less.”

Put simply, if fewer people want to buy an item that costs $200 more, prices may drop. This will depend on the type of good, the available substitutes and supply chains.

Some lessons can be gleaned from tariffs and countertariffs during Mr. Trump’s first term.

Martha Harrison, a lawyer who specializes in international trade, retail and consumer markets, said some estimates suggest that Canadian consumers paid up to 10 per cent more for some goods when Ottawa retaliated to Mr. Trump’s imposed 10 to 25-per-cent tariffs on Canadian lumber, steel and aluminum.

Matt Poirier, vice-president of federal government relations at the Retail Council of Canada, said the situation is “a mess” for businesses, who may be mulling over the same question as consumers: “How do you prepare for crazy?”

One study by the Canadian Federation of Independent Business found that 65 per cent of small businesses surveyed would raise prices in response to proposed tariffs and retaliatory measures.

Editor’s note: (Jan. 22, 2025): A previous version of this article incorrectly said, in a paraphrased statement attributed to international trade lawyer Martha Harrison, that some estimates suggest about 10 per cent of the 2018 tariffs on Canadian lumber, steel and aluminum were added to the price of some consumer goods. The estimates indicate Canadian consumers paid up to 10 per cent more for some goods. This version has been updated.