How tariffs (and counter-tariffs) hit B.C. and why a stronger economy is our best response

The latest escalation in the Canada-U.S. trade dispute creates two distinct challenges for British Columbia: new barriers facing B.C. exporters in the U.S. market and new costs at home as Canada retaliates. 

This analysis looks at both sides of that exposure: which B.C. exports are potentially affected by the new U.S. tariffs, and which U.S. imports into B.C. are covered by Canada’s counter-tariffs. The data show two different vulnerabilities. The U.S. tariffs are concentrated among a relatively small number of B.C. export products, while Canada’s response reaches more broadly into the machinery, materials, and other inputs businesses use to produce. 

While there may be a strategic role for retaliation, the best long-term response to a more uncertain trading relationship is a stronger Canadian economy. A stronger economy means more investment, more markets for Canadian businesses, and less dependence on any one trading partner. That puts Canada in a stronger position when access to a major market becomes less certain. 

B.C.’s exposure to U.S. tariffs 

We estimate that roughly $3.8 billion of B.C. exports to the United States (about 14% of our U.S.-bound goods exports) are potentially covered by the new 50% U.S. tariffs. As Figure 1 shows, that exposure is not evenly distributed. These new tariffs cover nearly $1.5 billion of B.C. machinery and electrical/electronic equipment exports to the U.S. These exports are the cornerstone of the province’s non-resource manufacturing base. Wood, pulp, paper and printing account for another $914 million. Together, those two groups represent nearly two-thirds of B.C.’s estimated exposure.  

Figure 1 

A deeper analysis makes the concentration even clearer. Figure 2 shows that the ten largest affected products account for about 60% of B.C.’s total estimated exposure. Electrical control boards and panels alone represent roughly $914 million (almost one-quarter of the entire provincial exposure). Veneer sheets, refined lead, cameras and other specialized manufactured products may also be impacted. The implication is that the effects will not be spread evenly across the economy but they will be much sharper for particular firms, industries, and communities.  

Figure 2

Canada’s counter-tariffs create a different exposure

Canada’s response creates a different type of exposure. Using the federal counter-tariff schedule which took effect on September 8, we estimate that roughly $2.5 billion of 2025 U.S. imports cleared in B.C. are covered. Canada’s counter-tariffs range from 15% to 50%, depending on the product. As Figure 3 shows, more than three-quarters of B.C.’s exposure is concentrated in metals and metal products, machinery and electronics, and wood and paper products. Many of these are materials, components, and equipment businesses use as inputs to build and produce.  

Figure 3

For example, Figure 4 shows the largest exposed B.C. products include parts for cranes, excavators and other heavy machinery ($191 million), corrugated boxes and packaging ($169 million), and data transmission and routing equipment ($83 million). Unlike B.C.’s export exposure, however, the counter-tariff exposure is less dominated by a handful of individual products. The ten largest account for only about one-third of the total. That suggests the higher costs could be dispersed more broadly through B.C. supply chains.  

Figure 4

Economist Trevor Tombe estimates Canada's retaliatory tariffs could ultimately raise overall consumer prices by roughly 0.25%, equivalent to nearly $4 billion in additional costs to consumers. He also estimates the cost of machinery and equipment investment (key business inputs) could rise by around 0.7%, while the cost of Canadian exports could rise by around 0.5% as more expensive inputs work their way through supply chains.  

Taken together, the figures show two different types of exposure. The new U.S. tariffs concentrate a large share of the potential damage among a relatively small number of B.C. export products and firms. Canada’s counter-tariffs, by contrast, reach more broadly across the machinery, materials, and other inputs businesses buy. The former restricts access to our largest export market while the latter risks increasing the cost of producing and investing here at home.  

For affected B.C. manufacturers, for example, this creates a compounding squeeze: facing a 50% tariff penalty when exporting finished products south of the border, while simultaneously absorbing 15% to 50% cost increases on the essential machinery and components imported to produce them. 

The durable response is a stronger economy

There can be a strategic case for targeted countermeasures where they protect Canadian producers facing an uneven playing field or create pressure in the United States to remove its tariffs. But retaliation also comes with costs, particularly when tariffs fall on inputs Canadian businesses rely on. And retaliation is not a long-term economic strategy. A permanently escalating trade war with an economy more than ten times our size cannot be the foundation of Canadian prosperity. 

The more durable response is to strengthen the economy behind our negotiating position. This means adopting a bold productivity agenda: encouraging more capital investment, allowing workers and capital to move toward their most productive uses, and expanding the markets in which Canadian businesses can compete. In practice, it means a more competitive tax and regulatory environment, faster and more predictable approvals, fewer barriers to investment and trade, and the reliable and stable infrastructure businesses need to reach customers beyond the U.S. market. 

Conclusion

Governments have acknowledged that a more uncertain trading relationship with the United States requires Canada to strengthen its productive capacity. Federal and provincial governments are putting more attention on fast-tracking major projects, reducing internal trade barriers, expanding trade-enabling infrastructure, and finding new export markets. Those are important steps, but they are only a start. Canada and B.C. still have much more work to do to become easier places to invest and hire. 

The next test is execution. Announcements, accelerated processes, and new trade agreements only matter if they translate into projects being built, capital being committed, and businesses becoming more productive. 

Canada should continue working to remove the tariffs and defend its interests when necessary. The more sustainable source of economic security though is an economy that can attract investment, build infrastructure, compete in more markets, and adapt when external conditions change. 

Ultimately, the best protection against a more uncertain world is not to become better at managing economic shocks, but to build an economy strong enough to withstand them.