Tariff threats: ‘Already an impact on our economy and jobs,’ Institut du Québec

The federal government announced counter-tariffs in response to Trump’s threats to impose tariffs, although many believe this move was necessary, it may result in consequences for Quebec’s economy – according to a recent analysis by the Institut du Québec (IDQ).

Ottawa has a two-part plan to hit back with retaliatory tariffs—beginning with a 25 per cent levy on $30 billion in U.S. products, followed with duties on another $125 billion worth of goods three weeks later.

“We’ve seen that 2025 was supposed to be a good year for Canada,” said Emna Braham, president and CEO of the Institut du Québec. “We had a lower interest rate inflation was on target. Consumers were able to have a little bit of a breather, but now this uncertainty is really shifting things around and so it already has an impact on our economy and on our jobs.”

Canadian companies that depend on U.S. imports will have two options the IDQ says: reduce their profit margins or raise their prices. The two options could lead to a disruption of decades of North American economic integration.

“Among the most interesting findings, our analysis reveals that Phase 1 of the Canadian plan spares the most critical imports for Quebec,” says Braham. “which is the majority of industrial inputs: mineral oils for refineries, mechanical components for aeronautics, spare parts for land transportation, etc. electrical equipment and handling vehicles. More specifically, these industrial inputs account for nearly 80 per cent of the U.S. products imported by Quebec. Thus, although the approach adopted will initially affect Washington only modestly, it preserves options for the future.”

The analysis also mentions potential gains from counter-tariffs by creating business opportunities. An example given within the analysis is Quebec companies that import softwood lumber from the United States. These companies would now be able to source from local suppliers, which would open a new market for Quebec producers and compensate for part of the losses brought by the imposition of U.S. tariffs.

Quebec consumers will still feel the downsides of the tariff war through price increases on consumer goods such as appliances, furniture, clothing, and food products. The analysis indicates that unlike the industrial impacts, which could vary from one region to another, these increases will affect all of Quebec.

“The core risk is really for manufacturing jobs,” said Braham. There is about 95,000 manufacturing jobs in Quebec in those sectors that are very dependent to US exports. So let’s think about aluminum, steel, aerospace. So 95,000 jobs that are in those very crucial sectors.”

Another analysis of the tariff wars by Institut Economique de Montréal (l’IEDM) suggests Canada should opt for a unilateral reduction in its trade barriers with the rest of the world. The institute says in a recent publication that this approach could strength its economy rather than destroy it.

“As tempting as it is to respond to tariffs with other tariffs, it risks making our processors and retailers less competitive and impoverishing our consumers,” explains Vincent Geloso, Senior Economist at the l’IEDM and author of the publication. “Eliminating our trade barriers with the rest of the world is the best way to protect the Canadian economy from the impact of U.S. tariffs.”

Canada ranks 47th in the world in terms of non-tariff barriers compared to United States in 88^th, l’IEDM says although Canada is ahead, these non-tariff barriers hinder the free movement of goods.

“Whether it’s a tariff or a regulation designed to hurt trade, the effect remains the same,” says Geloso. “This makes these products more expensive for both our consumers and our processors, and it reduces our ability to take advantage of the specialization that trade allows.

“The imposition of a tariff replica would have a similar effect and would be particularly felt by the least affluent households, who do not always have the means to pay more for their fruits and vegetables, for example.”

A study conducted for the Business Council of Canada in 2016 estimated that a unilateral reduction in barriers to international trade would increase Canada’s GDP by 1.67 per cent, and lead to a 1.51 per cent reduction in the overall price level.

l’IEDM defends the unilateral reduction approach by providing evidence that this approach has been done before.

During the period between 1983 and 2003, it is estimated that two-thirds of tariff reductions were due to unilateral reductions in trade barriers, the publication says. They indicate that Australia, in particular, reduced its tariffs on the manufacturing sector during this period.Switzerland as well abolished import taxes last year on industrial products, regardless of their origin.

“Protectionist policies are not the way to protect our free trade gains,” says Geloso. “And if we really want to reduce our dependence on American products, the best way is to open the door to their competitors from all over the world.”

Some local Montrealers have already begun boycotting American products in response.

“I don’t recommend  buying American products because we have our own identity and we don’t want to go to the US here,” said one local.

“I’ll boycott American products where I can like at the grocery store, but it’s not always easy to know the origin of a product,” said another local.

“It’s hard because its going to affect the American people as much as its going to affect us, no one is thinking about the bottom line, it’s just another Trump tactic that is going to ruin the country, and I don’t want to become the 51st state for sure,” said one Montrealer.