‘Uncertainty is almost as bad as the tariffs themselves’: Tariff threat alone hurts Alberta

March 1, 2025 Canuck

U.S. President Donald Trump’s tariff threats have been top of mind for Canadians since he took control of the White House, and whether or not that threat actually materializes, some are concerned the uncertainty is already affecting business operations north of the border.

Originally, Trump said tariffs levied against Canada would land on Jan. 20, his first official day in office. Then, that tariff deadline was pushed to various dates within the month of February. When those new dates rolled around, Trump mused about a March 4 deadline, promising a 25 per cent tariff on virtually all Canadian goods and a tariff on Canadian energy set at 10 per cent.

After some confusion about what goods would be subject to tariffs and when, earlier this week the deadline for tariffs against Canada seemed to shift to April 2, but as of Thursday morning, the president had arrived back at March 4 for most tariffs to take effect.

In Alberta, the province that generates significant revenue for the rest of the country, largely thanks to the energy sector, various industries continue to brace for impact as the deadline for tariffs against Canada changes, again and again.

But one economist suggests these last few months of uncertainty are already taking a toll on Alberta’s economy.

Charles St-Arnaud, chief economist with Alberta Central, which represents the province’s credit unions, says the focus may be less about the actual deadline and more about the risk that threat stirs up within Canadian industries.

“Many businesses that have a big level of operation and activity in the U.S. are reconsidering, ‘Can I continue to do what I do with the threat … with the risk of having tariffs in three months, six months, or maybe a year from now?'” said St-Arnaud.

He noted that companies with activities mostly in the U.S. may decide at some point to leave Canada if the uncertainty persists.

St-Arnaud believes that, regardless of when or if the tariffs actually come into effect, the threat alone is enough to have an impact on Alberta’s economy, referring to it as “death by a thousand cuts.”

“It’s no longer just economics,” he said. “It’s politics, it’s international relations. There’s so many different angles to the situation that cannot be ignored.”

‘It’s anyone’s guess as to where this is heading’

For independent businesses operating in Alberta, the idea of investing in an uncertain future could feel like a bad idea.

“Uncertainty is almost as bad as the tariffs themselves because that causes businesses to have to put the brakes on all sorts of stuff,” said Dan Kelly, president of the Canadian Federation of Independent Business.

Kelly is concerned the uncertainty and chaotic messaging coming from inside the Oval Office may actually be Trump’s end goal, as it drives behaviour for businesses. Kelly is concerned small businesses are already starting to look for ways to run leaner by thinning their head count or delaying planned expansions.

It means the president may be successfully undermining the Canadian economy with these threats alone, essentially positioning the U.S. as a stronger, more reliable place to do business in.

If a Canadian business owner is hoping to end the uncertainty, Kelly suggests the impending trade war could be a sign they need to expand or grow in the U.S. market, “to make sure that they’re on the other side of the tariff wall.”

“And even for Canadian businesses that have operations in more than one country, does that mean that any growth is going to happen in the U.S. market rather than in Canada? All of those are bad things for our country.”

Kelly believes business owners and operators in Canada have met these tariff delays with mixed emotions. Some days, he says, the business community feels optimistic — other days, that hope is fleeting.

“There has been a consistent threat of imposing tariffs on all or some Canadian imports into the United States since the president took office, with all sorts of milestones, differing dates, different information on what’s happening,” said Kelly.

“It’s anyone’s guess as to where this is heading.”

$9.3B of agri-food products to the U.S. in 2024

The United States is Alberta’s biggest trading partner, by far, across industries.

Alberta exported over $156 billion worth of goods to the United States in 2023, a large chunk of the province’s roughly $175 billion total exports to all markets last year.

Behind mineral products, Alberta’s second largest product export to the States falls under the food and agriculture category, exporting $9.3 billion in agri-food goods to the U.S. last year.

Ryder Lee, general manager of the Canadian Cattle Association (CCA), an organization based in Calgary that advocates for beef farmers, says the sector has historically been successful thanks to business being done through a relatively open border.

“What tariffs do is they make that border much thicker, more expensive to maybe make the decisions that make sense for businesses, for farmers and ranchers and feeders,” said Lee.

“That really sucks value out of the marketplace. It’s going to add costs [for businesses], and add costs in the grocery store, too. So it’s hard to find the spot where they expect to find the win here.”

Beef led Alberta’s international agri-food exports at $3.8 billion, followed by $2.8 billion worth of wheat and $1.7 billion worth of canola seed, according to government data.

The beef sector functions on a highly integrated Canada-U.S. supply chain.

When tariffs were pushed off to Feb. 4 by Trump, the CCA announced it was “extremely disappointed” about the 25 per cent levies against beef producers. Since then, Lee said not much has changed about the organization’s stance.

“The details have been kind of short … and we’ll probably be kept waiting right down to the wire to know what is [being levied] and what might not be, and until then you can’t, you’re kind of speculating on what the impact will be. And I don’t like to do that kind of speculating,” he said.

Regardless, he said, people have been making hard decisions about business ever since the tariffs were being spit-balled by Trump late last year. Such decisions include keeping cattle over the summer to put more weight on them before selling, or selling more bulls this time of year.

“With the uncertainty of what is going to unfold, how aggressive do you get on a maybe? And on what level? So people have taken steps, but it’s sure difficult to decide how far you should go.”

Budget 2025 built around shaky ground

The financial pressure tariffs would inject into the main artery of the Canadian economy — Alberta’s energy sector — has also bled into the province’s latest budget.

Tabled on Thursday, the province based its 2025-26 fiscal plan on the assumption the president will hit the Canadian energy sector with 10 per cent tariffs, and that tariffs on other exports will average around 15 per cent for the year. Here, Alberta’s estimate is that the tariffs will either be less than the 25 per cent Trump continues to promise, or that if they do come in at that number, they won’t stick around for the entire year.

Alberta is forecasting it will end the next fiscal year with a $5.2 billion deficit, but should U.S. tariffs manifest in a worst-case scenario, that number could climb to $8.7 billion. It marks the first deficit budget for an Alberta government since the 2020-21 fiscal year, which was presented during the early days of the COVID-19 pandemic.

The province is also projecting that the West Texas Intermediate (WTI) price of oil — the North American benchmark price that Alberta uses for budgeting — will be $68 US per barrel in the 2025-26 fiscal year. It’s a notable $6 decrease from the previous budget year’s $74 per barrel estimate.

Alberta oil producers may ‘absorb some of the costs’

Alberta is the largest source of crude oil shipped to the United States, exporting nearly $12 billion in energy products south of the border in December alone, according to the most recent provincial government data.

St-Arnaud suggests the mere threat of tariffs is already widening the price differential between the price of American and Canadian oil.

“We’ve seen evidence early on that when tariffs were announced … we’ve seen a widening of that spread,” said St-Arnaud. “And that was without those tariffs being official.”

WTI represents a blend of light, sweet oil. It’s easier to refine and it’s good for making gasoline. Because of this, it’s sold at a higher price than Canadian crude, called Western Canada Select (WCS).

WCS is a much heavier, sour blend of crude oil that comes from Canada’s oilsands. While it’s better for making diesel, it’s more difficult to refine, therefore it’s priced at a discount to WTI.

The concern around tariffs and the differential is that — while the price difference has always existed — tariffs would widen that gap even further, hurting revenues for Canadian producers by lowering the price they’re able to fetch for a barrel of Canadian crude, and negatively affecting the economy overall.

A widening differential is also something noted in the provincial budget, “as Alberta producers absorb some of the costs associated with U.S. tariffs on Canadian energy products.”

When asked about whether or not Trump’s delay bought the energy sector any additional time to prepare for tariffs, a spokesperson for the Canadian Association of Petroleum Producers (CAPP) said in an email that the organization will “wait for an official announcement from the U.S. administration with additional details before offering any comments.”

Canadians should ‘sleep with one eye open’

As for Kelly, he believes even if the president doesn’t go ahead with levies against Canada in the coming days — or weeks, or months — he doesn’t anticipate Trump will stop repeating his threat.

He suspects Trump’s tariff rhetoric will hover over Canada’s economy like a black cloud, and believes “we have to be prepared that just the threat of a tariff has its own negative consequences on the Canadian marketplace.”

“Look, my parting comment would be: Canadians are going to have to sleep with one eye open for four years,” said Kelly.

“We’re just at the start of this ride, and it’s looking like it’s going to be a bumpy one.”

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