Apr 3, 2025
Canadians and Americans have shared battlefields from Vimy Ridge to Kandahar. But they’re now bracing for an economic war against each other.
Canadian economist Mike Moffatt is sounding the alarm about this 150-year old alliance unraveling as Trump’s tariffs reshape public opinion north of the border.
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“I think it's a combination of we're hurt and angry,” said former advisor to ex-Prime Minister Justin Trudeau on a recent episode of The Prof G podcast.
He warned that the trade war could cripple the Canadian economy while also imposing hard costs on ordinary Americans by diminishing U.S. soft power.
Economic costs on both sides
Like any failing relationship, a trade war inflicts damage on both sides, leaving neither unscathed.
On the Canadian side, the Bank of Canada estimates that the trade war could lower GDP growth by as much as 3% in the first year.
“It would basically look like the 2008-09 financial crisis up here,” said Moffatt. “But unlike ‘08-’09, it would actually be inflationary in nature. It's actually a little bit more like the pandemic where we get the GDP drop of the financial crisis without the deflation of the financial crisis.”
The chaos has also shifted the way Canadians see their southern neighbors. According to a recent Leger poll, 27% of Canadians said they consider the U.S. an “enemy”, a stark rise from just 4% in 2020, according to YouGov.
Americans, too, are bracing for economic fallout. The Federal Reserve Bank of Atlanta recently lowered its first-quarter 2025 GDP growth estimate from approximately 3% to -2.4%. Meanwhile, a study by the Peterson Institute for International Economics estimates that the average U.S. household could face an additional $1,200 in costs due to the trade war. Notably, this estimate accounts for the offsetting impact of Trump’s anticipated tax cuts but doesn’t factor in the effects of reciprocal tariffs from other nations.
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One example of these retaliatory measures is a proposed 25% surcharge on electricity exports to New York, Michigan and Minnesota by the Canadian province of Ontario — potentially leading to higher energy bills for American families.
At the time of writing, the Trump administration has delayed several tariffs on Mexico and Canada until April 2. However, Canada’s reciprocal tariffs remain in effect. In this volatile and unpredictable environment, consumers and investors must take steps to protect their finances.
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Protect your finances
With uncertainty surrounding the length and severity of this trade war, families should take proactive measures to fortify their financial positions. Adjust your monthly budget to account for potential price increases and consider cutting back on non-essential spending. Reducing debt can also help your financial resilience.
Keep a close eye on your industry, as trade barriers may reshape the labor market. Several automakers, food distributors, freight companies and liquor producers have already begun layoffs.
Building an emergency fund with three to six months’ worth of expenses can provide a crucial safety net, particularly for those working in export-dependent industries.
These financial moves will not only help navigate the immediate economic turbulence but also position you and your family for long-term stability — regardless of geopolitical shifts.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
