Have US President Donald Trump‘s economic threats caused more fear than harm? As a whole, the Quebec economy seems to have avoided the worst, but certain sectors have been hit harder.
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Desjardins Movement economist Sonny Scarfone gives the image of a person who closed his eyes before the election of the Republican president only to wake up at the end of the year.
“When we look at several indicators, we would not say that this was the fastest increase in customs tariffs from our main economic partner in more than 80 years,” he notes in an interview.
Approximately 86% of Canadian exports are exempt from customs duties because they comply with the Canada-United States-Mexico Free Trade Agreement (CUSMA).
The economist estimates that the effective customs duty on the Quebec economy is around 6.3%. At the start of the year, there were fears of the imposition of a 25% tax on all Canadian products.
Quebec thus finds itself in an advantageous position compared to other trading partners who have signed agreements with the United States. This is the case of the European Union and Japan, which accepted a 15% tax.
Quebec is penalized more than the Canadian average, whose effective rate is estimated at 3.8%.
The importance of Quebec’s aluminum sector partly explains this gap, while Alberta oil and gas are exempt. “When you add a tariff of 50% on a ninth of your exports to your main recipient, it weighs on the average,” explains Mr. Scarfone.
Quebec is doing a little better than Ontario, a more comparable economy. The automobile industry weighs heavily in the exports of the most populous province, specifies Mr. Scarfone.
Paralyzing uncertainty
If the worst seems to have been avoided, the trade conflict was not without pain for Quebec companies, adds the president and CEO of the Federation of Chambers of Commerce of Quebec (FCCQ), Véronique Proulx.
“Above all, it is the uncertainty that is very damaging to our businesses and our economy,” she emphasizes. We see it with investment which is on hold. »
“What hurt the economy the most was the fact that everyone was on hold and putting their investment projects on hold, whether it be expansions here in Quebec, investments in technology, investments to diversify their export markets,” she adds.
During his discussions with leaders in all regions of Quebec, Mr.me Proulx sees signs of a resumption of activities. “This is a point that stands out: we quietly feel that things are starting again. It’s like we’re starting to get used to uncertainty, we’re starting to plan again. »
The trade war is not necessarily the biggest concern for entrepreneurs, she said. The scarcity of labor and immigration restrictions are causing them a lot of problems. “It’s the first thing people tell us about when we travel to the region. »
Aluminum: a hard blow for SMEs
Large aluminum smelters that have factories in Quebec, such as Alcoa and Rio Tinto, have emerged relatively unscathed from the crisis, despite sectoral customs duties of 50% on their products.
The United States does not produce enough aluminum to meet demand. In addition, sectoral customs duties have been imposed on all countries, which puts Quebec on an equal footing with other exporters.
The United States simply could not ignore Canadian aluminum, said Alcoa boss William Oplinger during a discussion with financial analysts in April.
“It would take at least five to six foundries to meet demand,” he said. These new smelters would require additional energy production equivalent to seven nuclear reactors or 10 times the Hoover Dam. Until production capacity is built in the United States, the most efficient way to source is through Canada. »
The situation is more difficult for Quebec processors, who do not necessarily have the big end of the stick, unlike aluminum smelters.
These SMEs have attracted less attention, but they still represent 1,700 companies. “There are 40,000 jobs in the aluminum industry in Quebec, including 30,000 in SMEs undergoing transformation,” underlines the President and CEO of AluQuébec, Charlotte Laramée. So, it’s still major. »
Processors must deal with an increase in the price of their inputs. Customs duties also bring the risk of losing contracts in the United States. “It’s really a financial pressure that is constant,” deplores M.me Laramée.
Completing the paperwork required by U.S. Customs is a costly and time-consuming administrative hassle. “SMEs must now invest in people dedicated to managing all the documentary requirements, monitoring codes, ensuring compliance with customs rules,” she says. It also means more lawyer fees. »
She cites one member who told her that their annual budget for administering customs-related paperwork had gone “from $0 to $200,000.” “All this for something which does not bring added value”, denounces Mme Laramée.
Forestry industry: a recovery in the spring?
Accustomed to trade disputes with the United States, the forestry industry is hit by cumulative customs duties of 45%.
The crisis has dealt a hard blow. Announcements of temporary closures have multiplied.
The chief economist of the Quebec Forest Industry Council (CIFQ), Michel Vincent, however, foresees the year 2026 with a certain optimism. Government assistance helped the industry “make it to spring.”
The Europeans took advantage of the dispute to sell their wood to the Americans, but this offensive will not be able to continue while domestic demand should increase on the Old Continent, believes the economist.
At the same time, Americans’ appetites should also revive. “We are seeing an increase in demand which will come from the drop in interest rates,” believes the expert. It’s a question of time. »
American companies will have no choice in sourcing from the Canadian market, according to him. “Self-sufficiency in lumber in the United States is unattainable and will never happen. »
“Canadian wood will be welcome,” he predicts. They will buy it and we will be able to pass the bill on to them. »
