Economy

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersHappy Sunday. In a 2023 column, I asked why Canada was not an economic giant. The musing stirred up over 600 comments.The mountainous North American nation is the subject of this week’s newsletter. The near-term outlook for the Canadian economy isn’t great. The US’s proposed 25 per cent tariffs on goods from Canada could lower its GDP growth by around 4 percentage points over two years (assuming they come into force and Canada retaliates), according to a Bank of Canada estimate.But in this edition I take a decades-long view, arguing that with an ambitious policy agenda, the G7 nation can become a major economic force. First, a word on its potential.Canada is the second-largest country by land mass, with the world’s longest coastline. It is bookended by the Pacific and Atlantic oceans, making it ideally situated for global trade.Marko Papic, chief strategist at BCA Research, also reckons Canada could be better off in a warmer world. “Global warming could increase agricultural yields, open up large swaths of the country to mineral exploration, and allow for new trade routes through the Arctic,” he said.The country is energy independent, with the world’s largest deposits of high-grade uranium and the third-largest proven oil reserves. It is also the fifth-largest producer of natural gas. Canada boasts a huge supply of other commodities too, including the largest potash reserves (used to make fertiliser), over one-third of the world’s certified forests and a fifth of the planet’s surface freshwater. Plus, it has an abundance of cobalt, graphite, lithium and other rare earth elements, which are used in renewable technologies.“Canada absolutely has potential to be a global superpower,” added Papic. But the nation has lacked the visionary leadership and policy framework to capitalise on its advantages. US President Donald Trump’s tariff threat has, however, shifted the Overton window. There is now a growing political consensus to unlock Canada’s economic potential and reduce its dependence on exports to its southern neighbour. That task will fall to either Prime Minister Mark Carney or opposition leader Pierre Poilievre following an election this year. Canada’s GDP has long trailed its G7 peers, ranking 16th globally in purchasing power parity terms. A country with its geography could clearly generate higher output. To do so, the Canadian economy needs to become more efficient, raise investment and attract more high-skilled workers. Here’s how.Some content could not load. Check your internet connection or browser settings.The country’s mountainous terrain impedes its dynamism. But Canada places significant bureaucratic burdens on the movement of people and goods too. This includes restrictions on the sale of certain goods across provincial borders, and variations in licences and technical standards that hinder scaling, competition and efficient resource allocation across the country. For measure, Canadian provinces export more to America than they do among themselves. A 2022 study by the Macdonald-Laurier Institute found that Canada’s economy could grow by 4.4 to 7.9 per cent in the long term — up to $200bn a year — if it eliminated internal trade barriers via mutual recognition policies. Similar reforms in Australia in the 1990s helped to boost productivity there.Faced with the threat of US tariffs, a provincewide consensus is emerging. An Angus Reid survey found 95 per cent of Canadians now support the removal of internal trade barriers. Some content could not load. Check your internet connection or browser settings.Simplifying its complex tax system, expediting planning processes, easing red tape for foreign direct investment and developing economic partnership mechanisms for indigenous populations, in tandem with internal trade reforms, would help businesses across the industrial supply chain tap into the nation’s vast energy and mineral resources.Canada can play a significant role in meeting the global demand for natural gas, uranium (used in nuclear reactors) and rare-earth minerals, especially as renewables and defence sectors are booming. The country’s natural resources, as well as its potential in higher value-add production and refinement activities, are also valuable assets as nations consider diversifying their supply chains from China, Russia — and even the US. Developing natural resource clusters around the country would support the agglomeration of related economic activities, including in advanced manufacturing, finance, and research and development. This means boosting connectivity to support trading outlets to Asia and Europe is key. Right now, around three-quarters of Canadian goods exports go to America. (Any future, friendlier US administration would then be a bonus.)Some content could not load. Check your internet connection or browser settings.“Canada must continue to build up its trade and energy infrastructure coast to coast, including ports, roads, railways and pipelines”, says Varun Srivatsan, director of policy at the Royal Bank of Canada. The country ranks 103rd out of 113 for port turnaround times, according to the World Bank.Next, people. With a population of just 40mn, Canada is one of the world’s least densely populated countries. But remarkably, it also has one of the developed world’s worst housing shortages. Average house prices have tripled in the past two decades, with high mortgage debt straining consumer spending.This is both a demand and supply problem. Immigration jumped under former Prime Minister Justin Trudeau, helping to expand the country’s sparse labour market. But it also strained public infrastructure, which did not develop at the same pace.Some content could not load. Check your internet connection or browser settings.Tighter immigration controls will provide temporary reprieve. But with an ageing population and a relatively small labour force, Canada needs to continue to attract talent over the long term. (Artificial intelligence and robotics — which both require investment — can only go so far.)This shouldn’t be too difficult. Canada outperforms the average on the OECD Better Life Index in education, health and life satisfaction. Calgary, Vancouver and Toronto are ranked among the best cities to live in. And Canada is the world’s most appealing destination for the university educated, according to the Economist, which estimates about 17mn graduates would move there if they could.Building more homes will ensure it remains attractive and affordable for both domestic and international workers. (Canada doesn’t utilise immigrants’ skills as efficiently as it could either. A harmonised, nationwide recognition of foreign credentials would help, notes the OECD.)Some content could not load. Check your internet connection or browser settings.This is not an exhaustive list of policies. But they ought to be among the long-term priorities for any Canadian administration seeking to capitalise on the nation’s enormous, latent potential. Does Canada have the money? It has the G7’s lowest net debt and deficit levels as a percentage of GDP. So growth-enhancing investment could be financed in part by borrowing. But gross debt is high.Canada also has vast pools of capital and expertise in its world-class pension funds — the “Maple Eight” (its largest pension pots) oversee $1.6tn in assets. They could back lucrative capital investments in the country. Natural resource revenues could be channelled into a sovereign wealth fund as in Norway with provincial buy-in. And so long as infrastructure and less red tape enable it, FDI would be plentiful. The Canadian economy is at a crossroads. The belligerence of its main trading partner is driving consensus around boosting the national economy. The world needs what Canada has in abundance. The nation has a unique chance to reach its potential. If it wants to.Rebuttals? Thoughts? Message me at [email protected] or on X @tejparikh90.Food for thoughtHere’s another possible explanation for Britain’s productivity puzzle. Kallum Pickering, chief economist at Peel Hunt, ran an interesting analysis that linked falling electricity supply to weak productivity growth in the UK. Could it be that Britain has simply lacked the energy to grow faster?Recommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

President Donald Trump’s controversial plans for tariffs and comments about Canada becoming a state has angered the country’s consumers and politicians.
Canada has long been a key ally and trade partner for the U.S., with residents shopping American brands and flocking south of the border for vacations.

A “Shop Canadian” sign is seen at the entrance of a supermarket in Vancouver, British Columbia, Canada, March 4, 2025. 
Liang Seng | Xinhua News Agency | Getty Images

Canadians are swapping their friendly auras for a fierce sense of nationalism amid U.S. President Donald Trump’s attacks on the country’s trade and sovereignty.
Trump’s mostly delayed plans for 25% tariffs on Canadian goods and his calls for the country to become an American state has spurned citizens of the U.S.’s northern neighbor and key trade partner. As a result, Canadians have rejected American imports and issued other economic punishments in an unusual show of patriotism.

“It really feels for most Canadians like we’ve been backstabbed, that the person that we trusted the most is now sort of turning on us and attacking us for no apparent reason,” said Joel Bilt, an economics professor focused on international trade at the University of Waterloo in Ontario. “That has really unified people.”
Grocery stores have encouraged visitors to “shop Canadian” with signs and special labels in aisles alerting them to which products were made domestically. A popular Facebook group focused on buying Canadian-made goods first reported on by NBC News has seen its membership more than double since early February as the on-again-off-again tariff policy played out.

A “Shop Canadian” sign is seen at the entrance of a supermarket in Vancouver, British Columbia, Canada, March 4, 2025. 
Liang Seng | Xinhua News Agency | Getty Images

More than 60% of Canadians reported buying fewer American products when shopping either in store or online, according to a survey from market research firm Leger of more than 1,500 residents conducted between March 7 and March 10. Just over seven out of 10 said they upped their purchases of goods made within the country, which has the ninth largest economy in the world.
The Liquor Control Board of Ontario went even further, barring its members from ordering American alcohol. Because the LCBO sells upwards of $1 billion in American liquor each year, the move has raised alarm for U.S.-based spirit makers like Jack Daniel’s parent Brown-Forman.
“That’s worse than a tariff,” said Lawson Whiting, chief executive of Brown-Forman, on the Kentucky-based company’s earnings call this month. “It’s literally taking your sales away.”

Empty shelves remain with signs ”Buy Canadian Instead” after the top five U.S. liquor brands were removed from sale at a B.C. Liquor Store, as part of a response to U.S. President Donald Trump’s 25% tariffs on Canadian goods, in Vancouver, British Columbia, Canada, February 2, 2025. 
Chris Helgren | Reuters

Ontario also said it would implement a 25% surcharge on electricity exported to Michigan, Minnesota and New York. But Ontario Premier Doug Ford said that he would temporarily halt this tax after U.S. Commerce Secretary Howard Lutnick agreed to restart negotiations.
Trump initially responded by calling to raise tariffs on Canadian steel and aluminum to 50%, but the White House told CNBC that he backed down following the conversation between Lutnick and Ford.
Still, Trump’s now-withdrawn plan for higher taxes on the metals put the United Steelworkers union — which represents about 850,000 people in the U.S., Canada and the Caribbean — on alert. USW International President David McCall said in a March 11 statement that the North American arms of the international trade organization would “fight together” against the proposed levies, which he said threatens jobs on both sides of the U.S.-Canadian border.

A ‘pushback’

Even as the tariff negotiations remain in flux, travel to the U.S. is already taking a hit. Return trips by Canadians from the U.S. by vehicle tumbled around 23% in February from the same month a year ago, according to government statistics.

Government data also showed the number of Canadians flying back into the country from international locations declined in February from a year ago, signaling a pullback in tourism abroad. That comes as Air Canada announced plans to cut capacity to warm U.S. locations like Florida, Arizona and Nevada beginning this month.
Trump’s threats have prompted some cancellations to the Wildwoods in New Jersey, a popular beach destination for travelers from places like Montreal and Quebec, according to Ben Rose, marketing and public relations director at the Greater Wildwoods Tourism Authority. But he said these rescissions haven’t been as widespread as initially expected. Canadians are also weighing concerns around the exchange rate, he added.

Air Canada planes are seen at the gates at Montréal-Pierre Elliott Trudeau International Airport in Dorval, Quebec, Canada on April 2, 2024. 
Daniel Slim | Afp | Getty Images

At consumer travel shows in Toronto and Montreal, the authority received some comments from potential Canadian travelers about how Trump’s plan for levies has deterred vacationing in America. Rose said his team reminds uneasy Canadians that it has been a welcoming destination for them over several decades and provides unique value as a location within driving distance.
“Some of the pushback we’ve been getting is that: ‘You know we love Americans, and we know they love us, but we’ll see you in four years,'” Rose said. “They can’t go along with the administration.”

Political, cultural efforts

Canadians’ stance against Trump’s policies has spilled into culture and media as the issue captured the country’s interest.
Canadians booed the U.S. national anthem before major-league sporting games against American teams. During an appearance on Saturday Night Live this month, Canadian celebrity Mike Myers donned a shirt that reads “Canada is not for sale” alongside the country’s red-and-white flag.

(l-r) Musical guest Tate McRae, host Shane Gillis, and special guest Mike Myers during Goodnights & Credits on Saturday, March 1, 2025.
Will Heath | NBCUniversal | Getty Images

Tariffs have become a focal point of Canada’s government, which saw ex-central banker Mark Carney clinch the prime minister title this month. Carney succeeds Justin Trudeau, who Trump had begun referring to as “governor” in reference to his hopes of making Canada a U.S. state.
The British Columbia government and its power operator said they would exclude Tesla products from certain green-energy rebates as of March 12, an action done to give “preference” to Canadian-made alternatives. Tesla is run by CEO Elon Musk, who has come under fire from critics for his leadership of Trump’s controversial government efficiency initiative.
Waterloo’s Bilt said Canadians’ anger is focused mainly on Trump rather than Americans at large, meaning personal relationships between citizens of each country likely wouldn’t be frayed as a result. However, he said American businesses should expect Canadians — once known as a laid-back, polite group that didn’t think twice about shopping U.S. brands or vacationing south of its border — to rebuff them until Trump backs down.
“It really has elicited the kind of response that I have never seen before,” Bilt said. “Canadians are not fundamentally nationalistic, but this really sort of hit something strong at the core of the average Canadian.”
— NBC News and CNBC’s Dan Mangan and Laya Neelakandan contributed to this report.
Disclosure: Saturday Night Live is part of NBCUniversal, which also owns CNBC. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.China’s President Xi Jinping has declined an initial invitation to visit Brussels for a summit to mark the 50th anniversary of ties, as the EU questions the sincerity of recent Chinese overtures.Beijing told EU officials that China’s second-ranked leader Premier Li Qiang would meet the presidents of the European Council and Commission in Brussels for the summit rather than Xi, two people familiar with the matter said. The hosting of EU-China summits traditionally alternates between Brussels and Beijing. The premier usually attends the summit in Brussels, and Xi hosts it in Beijing, but the EU believes the importance of this meeting — to commemorate half a century of diplomatic relations — means that China’s president should attend, the people said. Both sides said talks continued, but the initial snub has confirmed the view among many in Brussels that China will not add concrete action to its warm words about the need to co-operate in the face of US President Donald Trump’s assault on the multilateral world order.This year’s summit comes at a particularly sensitive time for EU-China relations. Tensions between Brussels and Beijing have grown since Russia’s full-scale invasion of Ukraine in 2022, with the EU accusing China of backing the Kremlin. The bloc has also imposed tariffs on Chinese electric vehicle imports, claiming they are subsidised. EU officials say China, which last year had a €304.5bn trade surplus with the bloc, is not doing enough to rebalance trade by reducing subsidies for its industries and lowering trade barriers for foreign companies doing business in the world’s second-largest economy.“The relationship is on ice,” said a senior EU diplomat. “It is a change of tone not substance. Their policy is not going to change and the same is true for us.”Lu Shaye, China’s former outspoken ambassador to France who is now Beijing’s special representative for European affairs, said China’s policy towards Europe had always “advocated peace, friendship, co-operation,and mutual benefit”. “This has never changed. It is just that the contrast with the current US policy towards Europe makes China’s policy towards Europe appear even more visionary, fair and reasonable. I hope this could serve as a wake-up call [for Europe],” he said. Known as a “wolf warrior” diplomat for his aggressive diplomacy, Lu caused an uproar in Europe last year when he questioned whether Crimea was part of Ukraine and the sovereignty of former Soviet republics such as EU members Latvia, Estonia and Lithuania.His appointment to manage China’s diplomatic relationship with Europe was seen by some commentators as a hardening of Beijing’s stance, but at the same time, another EU diplomat said, “there is a Chinese charm offensive under way”.“China even said that they expect Europe to have a seat at the negotiating table [in Ukraine peace talks],” the diplomat added. “I also hear less talk about EU-China trade frictions. They still exist, but there is less focus on it.”The EU’s trade chief Maroš Šefčovič is set to visit China at the end of this month. Spanish foreign minister José Manuel Albares told the Financial Times last month that the EU should also see potential opportunities. When China “can be a partner — let’s take advantage of that”, Albares said.Ursula von der Leyen, European Commission president, said in February that while the EU would keep “de-risking” by protecting its industry, “we can find agreements that could even expand our trade and investment ties”. Trump’s 25 per cent tariffs on steel and aluminium have forced the EU to respond, even as industry groups warn of the damage it will cause. But a senior EU official said a critical focus when it came to China was defensive measures to keep out “a wave” of Chinese products displaced from the US market by the tariffs.On Friday the EU opened an anti-dumping investigation against Chinese exports of adipic acid, used to produce nylon and many other products. It is the 11th case since October, including those regarding sweetcorn, metal screws and candles.“Informal discussions are ongoing both about setting the date for the EU China summit this year and the level of representation,” said an EU official.China’s ministry of foreign affairs said it did not have “any information to provide” regarding the matter. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldHalf of all Mexican exports to the US last year did not arrive under North America’s free trade deal and therefore still face an immediate risk of 25 per cent tariffs imposed by President Donald Trump, according to US government data and trade experts.Most of those goods could meet USMCA trade deal terms by filing extra paperwork, but about 10 per cent of Mexico’s exports to the US — worth about $50bn — will struggle to comply, leaving companies with a dilemma: scramble to switch their supply chains, or wait and see if the tariffs stick. Trump agreed this month after two days of market turmoil to exempt goods sold under the USMCA from the tariffs he says are needed to restore fairness to the US’s trading relationship with Mexico and Canada.But a chunk of those likely do not meet rules for minimum levels of North American content, according to Mexico’s economy ministry, casting a pall over the economy of America’s largest trading partner. Under Trump’s current plans, those products will face bigger fees than goods from China, his trade nemesis, which are only subject to a 20 per cent tariff.“Losing the market in the US is not an option for Mexican manufacturers,” said Andrés Díaz Bedolla, chief executive of Yumari, a manufacturing platform that exports to the US. “What people are doing right now is adjusting their supply chain in order to meet the rules of origin that are required — even if it’s more expensive.”Sellers of about half of the $505.9bn of goods exported to the US last year did not go through the sometimes costly process of complying with USMCA requirements to prove what proportion of components originated in North America.However, about 40 per cent, worth roughly $200bn, went through duty-free anyway, because the US imposed no tariffs on goods such as medical devices, beer and tequila — meaning there was no incentive to complete the extra paperwork. The remaining 10 per cent did face tariffs, but they were mostly fairly low before Trump’s move to increase them. This bucket included goods such as cars, auto parts and electronics that may not comply with USMCA requirements, but also some oil, which had such low tariffs that companies chose to pay the duty instead of dealing with compliance costs, according to Trade Partnership Worldwide, a consulting firm.The new 25 per cent tariff has changed the calculation, pushing businesses to figure out if their goods already are, or can become, compliant.Meeting USMCA regulations is straightforward for many products — Mexico’s economy minister, estimated that 85-90 per cent of exports should meet the rules by April 2. “We’re talking about one or two days,” said Javier Zarazua, a partner at JL Nearshoring Mexico. “It’s a quick process.”However, the remainder is more complicated. The rules are particularly strict for the politically sensitive automobile sector. The Mexican Automotive Industry Association has said 8.2 per cent of cars exported to the US do not comply. For car parts, the figure is 20.4 per cent.For electronics, more than 50 per cent of components generally have to be from North America.“I suspect many electronics will be less likely to qualify,” said Jason Miller, a professor of supply chain management at Michigan State University. “A lot of the components are likely coming from Asia.”Businesses are being forced to make these existential decisions with no certainty about which of the boomeranging policies Trump has proposed will stick.That uncertainty is its own burden, said Díaz Bedolla.“Everything comes to a halt, no one takes decisions,” he added. “If you’re going to impose tariffs, just do it already.” More

Audrey Louail has finally managed to hire the technology workers she needs. That is only possible because her rivals are cutting headcount. “I had a lot of problems recruiting last year, but now there are enough people on the market,” said the chief executive of IT services group Ecritel. A poll of the Croissance Plus network of high-growth companies, which Louail leads, shows a third of its 11,000 members planned to cut staffing this year amid a weak economic outlook and impending fiscal squeeze.“This is the first time it’s been this bad since Covid,” she said of the poll. Official data and business surveys paint a worsening picture of the labour market in the Eurozone’s second-largest economy — undermining President Emmanuel Macron’s years-long efforts to push France to full employment, often defined as a jobless rate of about 5 per cent. The employment rate contracted for the first time in a decade late last year, according to statistics agency Insee. The figure for those aged 16-25 has fallen more sharply, though youth joblessness remains much lower than before Macron took office.“We are at a tipping point,” said Olivier Redoulè, a director at Rexecode research institute. Although job losses had not yet surged, he added, “we’re starting to see the first signs of the labour market going the wrong way — and if that happens, it can take a long time to repair”.Some content could not load. Check your internet connection or browser settings.Households’ fear of unemployment is climbing. PMI surveys point to widespread headcount cuts, while France’s wage growth has been the weakest among major economies over the past year, according to job search site Indeed. “The labour market weakening is very clear,” said Charlotte de Montpellier, senior economist at ING, who believes France’s jobs market will underperform Germany because of greater political uncertainty, and spending curbs on public sector hiring.Corporate bankruptcies are mounting and lay-offs are piling up, including at big companies such as retailer Auchan and tyremaker Michelin where they are closing two factories. The flow of bad news prompted a relaunch on March 1 of the state-subsidised furlough scheme that helped companies hang on to workers through Covid-era lockdowns. Some content could not load. Check your internet connection or browser settings.The only indicator that remains stable is unemployment, which on Insee’s measure stood at 7.3 per cent at the end of 2024, almost the lowest level since the early 80s.The hiring slump marks a break in a jobs boom that began well before the pandemic, as earlier reforms cutting labour costs, loosening job protections, and lowering corporate tax bore fruit. Since 2020, the workforce has grown by more than a million, fuelled by the rising pension age and subsidies for apprenticeships and vocational training. Those gains have not reversed. “Ten or 15 years ago, unemployment would rise [into double digits] if growth fell below 1.5 per cent,” Stéphane Carcillo, a senior economist at the OECD, said. “Now, even with GDP growth below 1 per cent, unemployment is below 8 per cent. That is pretty new.”A protester holds a placard reading ‘Looking for a fair budget!’ More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe needs a “big bang moment” to boost long-term investment in companies and capitalise on this year’s surge in the region’s stock markets, according to the head of Germany’s stock exchange.Stephan Leithner, chief executive of Deutsche Börse, told the Financial Times that EU officials should make the most of investors switching into European markets away from the US as worries over tariffs rise.He wants Brussels to speed up plans to make the bloc more competitive by pushing forward on reforms to encourage domestic investment in the region’s companies.“Many small things have been done but the big bang moment was missing,” he said. “It’s now a moment for a big bang . . . the sense of urgency is there.”Germany’s Dax index has outperformed the US S&P 500 this year as investors dump American equities in favour of European stocks, which are less exposed to the impact of Donald Trump’s tariffs. The Dax has risen 14.8 per cent since the start of the year, while the S&P 500 has fallen 3.9 per cent.The EU has largely escaped the worst of Trump’s barrage of tariffs, which have pushed America into a trade war with major trading partners including Canada and China. Stephan Leithner: ‘It’s now a moment for a big bang . . . the sense of urgency is there’ More

President Donald Trump’s tariffs on Canadian products, along with the escalating trade war and rhetoric between the two nations, is starting to squeeze some small businesses in Vermont.
Concerns for those small businesses include a decline in merchandise shipments to Canadian customers, a drop off in Canadian tourism and higher prices from imported products.
“I would rather take the position of being proactive and not just thinking about absorbing the problem,” said Bill Butler, a co-owner of Artisans Hand Craft Gallery in Montpelier.

Ryan Christiansen, president and head distiller at Caledonia Spirits, giving a tour in Montpelier, VT.
Courtesy: Ryan Christianse | Caledonia Spirits

President Donald Trump’s tariff rhetoric against Canada has only started to heat up, but Vermont’s small businesses are already feeling some pain.
A shipment of spirits, ordered by the Société des alcools du Québec – an entity that’s responsible for the trade of alcoholic beverages in the province – has been sitting on a shipping dock at Montpelier-based Barr Hill by Caledonia Spirits for about a month.

The SAQ called off the order shortly after Trump announced the tariffs against Canada in February, according to Ryan Christiansen, president and head distiller at Caledonia Spirits.
“Customers are ready to buy, and we are in the peak of slow season – it’s an annual cycle for us, and we were looking forward to shipping the order. Now, it’s sitting on the dock,” he said. “To have this hit our business in the slow month of February? We missed our financial plan in February because of this.”

Exports at Caledonia Spirits in Montpelier, VT.
Courtesy: Ryan Christiansen | Caledonia Spirits

Vermont has a special relationship with Canada, as the Green Mountain State exports $680 million in goods to the U.S.’s northern neighbor annually, according to data compiled by Connect2Canada. Vermont imports more than $2.6 billion in goods from Canada each year, with electricity and fuel oil among the top imported goods.
Because of the state’s close business ties to Canada and their shared borders, small businesses in Vermont began seeing some fallout as early as February – when Trump first announced a round of 25% tariffs on goods from Mexico and Canada, triggering 25% retaliatory levies from then-Canadian Prime Minister Justin Trudeau. At the time, Ontario also said it would pull American alcohol products from its shelves.
Ultimately, Trump granted a reprieve on Canadian and Mexican goods covered by the North American trade agreement USMCA until April 2. However, many products are still subject to the duties.

“We worked really hard to maintain this relationship with the Canadian government,” Christiansen said. “How do I get them to buy as much as the Canadian customer wanted to buy? Even if the tariffs go away, I think it’s overly optimistic that this order gets resubmitted.”
Tourism worries
It didn’t take long for Steve Wright, president and general manager of Jay Peak Resort, which is about 10 miles from the Canadian border, to begin seeing the impact of the rhetoric around tariffs.
He noted that spending from Canadian tourists showed signs of softening particularly in two key weeks: Quebec break week, which ran from March 3 to March 8, and Ontario break week, which kicked off on March 10.
Though Canadian visitors generally account for about half of the resort’s market, they make up virtually all of it during that two-week stretch, Wright said.

Arrows pointing outwards

People ski at Jay Peak in Jay, VT.
Courtesy: Patrick Coyle, Darla Mercado | CNBC

“The Quebec break week sold really well, and we had great conditions, but what was missing was the day market,” he said. “We did not get the day traffic we usually see from Montreal, that part of the market softened up.”
Tariff rhetoric has only been the latest pressure point for Jay Peak. The resort’s manager also pointed to the reduction in hours of operation for the nearby North Troy, VT border crossing. It went from 24 hours a day to 8 a.m. to 8 p.m. in January.
To accommodate its Canadian clientele over the past two decades, Jay Peak has been offering at-par options for these tourists on non-margin products. “Say a lift ticket is $100, you can give us C$100,” Wright said. “That has insulated the business a little bit.”
“They have an affinity for Jay Peak; they have been coming here for a generation, but there is a point where they will decide to stay home despite their love of the place,” he added.
In Montpelier, which is a roughly two-to-three-hour drive from Montreal, worries about tourist traffic are already bubbling among small businesses. This corner of the state tends to see weekend visitors from up north, particularly in the temperate summer and fall seasons.
Bill Butler, a co-owner of Artisans Hand Craft Gallery, has been in talks with fellow entrepreneurs in downtown Montpelier to propose promotional deals for Canadian visitors to keep the foot traffic coming.
“My idea is to have something like ‘Canada Days,'” he said. “We’d have a deal for Canadians who want to come down, have a little tour of the city and go from place to place, and get a free beer or coffee.”
“I would rather take the position of being proactive and not just thinking about absorbing the problem,” Butler said. “We have a great relationship with Canada, and we see a lot of Canadians in the gallery.”
The price of imported goods
For Sam Guy, owner of Guy’s Farm & Yard in Morrisville, tariffs are raising concerns over higher prices for certain products.
Wood shavings, wood pellets and peat moss sold at the local chain store all come from Canada, while animal feed – though made by an American company – includes ingredients that come from Canada, he said.
A 25% tariff tacked onto imported products would inevitably have to be passed on to shoppers.
“We can’t eat this,” Guy said. “We’re going to pass on the tariff. We’re not going to add a margin or anything like that, but a lot of these are low margin products.” More

<!–> [–> <!–> –><!–> [–><!–> –><!–> [–><!–> –><!–> [–><!–> –><!–> [–><!–> –><!–> [–><!–> –> <!–> –><!–> [–><!–> –><!–> [–><!–> –><!–> [–><!–> –><!–> [–><!–>Robert Maxim, a fellow at the Brookings Metro, a Washington think tank that has done similar analysis, said that other countries had particularly targeted Trump-supporting regions and places where “Trump would like to […] More