Canada would suffer smallest hit in reciprocal tariffs scenario, Yale study suggests
Canada fares the best if United States President Donald Trump ends up imposing reciprocal tariffs, according to a new report by Yale University.
The university’s Budget Lab estimated tariff rates on Canada would increase by 4.59 percentage points, which would be the smallest among the 20 countries studied.
Other G7 members fare worse, with Japan’s tariff rate rising by 10.9 percentage points, France’s by 18.9 percentage points, Germany’s by 19 percentage points, Great Britain’s by 19.9 percentage points and Italy’s by 23.2 percentage points.
Mexico, the third partner in the United States-Mexico-Canada Agreement (USMCA), would have tariffs rise by 16.3 percentage points.
The Budget Lab calculated the increases using value-added tax rates (VAT), or the goods and services tax (GST) in the case of Canada, and matched those rates on a commodity-by-commodity basis, distinguishing between 65 goods and services. The modelling excluded areas such as currency and trade policy that were mentioned in Trump’s order.
“(The results) made a lot of sense once we sort of processed what was going on here,” Ernie Tedeschi, director of economics, said.
Canada came out ahead in the exercise because the GST is low compared with VAT taxes in Europe and Mexico’s federal tax, which is 16 per cent, he said. Provincial sales taxes were not included in the calculations.
“Reciprocal tariffs to begin with, even if countries don’t retaliate, make everybody worse off, including the United States,” Tedeschi said. “And then when countries retaliate to those, it then makes everybody further worse off.”
Karl Schamotta, chief market strategist at Corpay Inc., said “Canada looks well insulated against reciprocal tariffs,” based on the Budget Lab’s study.
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