If the US enacts tariffs on Tuesday, what changes in the NWT?

A looming tariff war would thrust Canada into “unprecedented times,” Yellowknife economist Graeme Clinton says.

Tariffs of 25 percent on almost all Canadian goods imported into America were first announced by President Donald Trump in late January.

A last-minute reprieve arrived in early February, taking the form of a 30-day pause. Those 30 days are almost up – and Canada now waits to see if there will be another change in plan on Monday, or if those tariffs will come into effect on Tuesday.

If the US does carry out its tariff threat, Canada has lined up retaliatory measures on imports from the States worth tens of billions of dollars.

We first reported on the possible impact of tariffs on the NWT at the start of February. Now that tariffs are back on the minds of Canadians, here’s another chance to read that analysis – with some updates.

When Prime Minister Justin Trudeau and Trump reached the February deal averting a trade war for at least 30 days, there was no guarantee a trade war had gone away.

On Sunday, US Secretary of Commerce Howard Lutnick said tariffs on both Mexico Canada would begin on Tuesday, but said the exact dimensions of those tariffs were still being negotiated.

The Northwest Territories has no direct land border with the US and limited direct trade, but Premier RJ Simpson has said the territory is “not immune” to the repercussions of tariffs. So what would that actually feel like to residents and businesses in the North?

Speaking to Cabin Radio at the start of February, NWT-based economist Clinton said “nothing good” would come from the arrival of 25-percent tariffs (expected to drop to 10 percent for energy products like oil).

“From an economics perspective, it is the complete opposite of what you want in terms of trade,” he said.

With tariffs in play, “life is going to get more expensive,” Clinton said. While the US tariffs’ impact would take a while to trickle down into consumer prices, Clinton said Canadian countermeasures might lead “prices to change even sooner on certain products.”

The initial list of US products to be subject to Canadian retaliatory tariffs included everything from butter to tires to sports equipment. Vehicles, lumber and particularly food could all become more expensive.

“Consumers will be affected,” Clinton said, “especially at the grocery store.”

Justin Nelson, general manager at Yellowknife’s Co-op, said the grocery store’s customers had “lots of concerns” when tariffs first loomed a month ago.

“What we are seeing is a lot of customers are requiring more Canadian products,” Nelson said at the time. “Some of them are actually wanting us to ban US products in store, which isn’t very feasible.”

The Co-op had planned to start work on clearly identifying all products produced in Canada. “There’s definitely a concern out there with our membership,” Nelson said.

As the effects of tariffs continued, a broader “slowdown of the Canadian economy” would follow the price increases, Clinton said.

“There’ll be a lot of people who are unemployed,” he said, adding that might impact southern Canada more directly but the impacts “will trickle down to us, for sure.”

Depreciation of Canadian dollar

Not only will prices go up because we’re trying to import things from the US that have tariffs on them, but the Canadian dollar will also depreciate as a result, Clinton said.

By exactly how much is unclear. “It could be five or 10 percent, so maybe 10 percent to the US dollar, maybe five percent to other currencies around the world,” he said. That would make everything we import from other countries more expensive, too.

The impact on the NWT’s tourism sector could be complicated.

American tourists, for example, might be more inclined to visit the territory as trips would become cheaper from their perspective. But tour operators might face higher costs.

Richard McIntosh, one of the owners of Sundog Adventures and the Sundog Trading Post in Yellowknife, had been anticipating the price of goods his café needs would go up.

On Monday, McIntosh had been waiting to hear from suppliers about exactly how prices might change. “Overall, our costs are going to go up, so we’ll have to figure out how to accommodate for that,” he said.

Watching the news for updates, he said he felt “frustrated at the seemingly pointless approach to the trade wars.”

The Dene Nation said in a statement that tariffs would have a “profound” impact on Indigenous businesses through increased costs and reduced market access. It said the economic strain could “deepen the socio-economic disparities” in Indigenous communities.

The Dene Nation added that a trade war between Canada and the US would affect cultural practices and social cohesion, saying the “preservation of our cultural heritage is intimately linked to our economic well-being.”

“I emphasize that our people must take a leading role in any discussions regarding trade policy and its impact on our communities,” stated Dene National Chief George Mackenzie. “The economic well-being of the Dene is intricately linked to the broader Canadian economy. Yet, our voices have often been sidelined in conversations crucial to our future.” 

Made in Canada?

Some businesses could take advantage of the way in which tariffs have already been shown to drive people toward supporting local markets and products.

Buying Canadian “helps to a certain extent,” said Clinton, by alleviating some of the pressure on Canadian manufacturers who lose their US market. But avoiding US manufacturers would have only a limited effect on the US economy.

“It doesn’t hurt, of course, to buy Canadian,” he said. “But only to a certain extent. Like, it’s not going to save us.”

Even so, the news might not be all bad if tariffs do go ahead. Depending on how the situation plays out, Clinton said, a lower Canadian dollar can help the mining industry.

“It can actually represent increased profitability for some mining businesses,” Clinton said.

Conversely, he noted, “I have heard about the possibility of the Canadian government limiting or interfering with the shipment of mineral resources to the US, so that, of course, would have a major effect.” Last month, for example, the CBC reported that British Columbia’s provincial government would divert critical minerals away from the US.

That “certainly would have an effect on investments in the Territories’ future, if it’s coming from international investors,” Clinton said.

Robin Goad is the president of Fortune Minerals, which plans to develops the Nico mine, a proposed cobalt, gold, bismuth and copper project outside Whatì. The project has received funding from both the Canadian and US governments.  

Goad said he didn’t think the tariffs would cause a direct impact on the project, but could affect it indirectly.  

“When you destabilize capital markets, then you’re damaging all industry,” Goad said this time last month. “If you damage the economy, you damage the capital markets. You damage the source of funding for the mining industry.”

On the other hand, Vital Metals managing director Lisa Riley offered a longer-term view of how tariffs might be positive for the company’s Nechalacho rare earths project east of Yellowknife. Riley suggested they might ultimately lead to more emphasis on industrial supply chains within Canada.

“I think it will focus the government on realizing that they need to choose the levers that they’re going to play in negotiating with the Americans,” Riley said.

“The fact is that Canada and the US have spent years building out supply chains that were shared amongst the countries, and all of a sudden those are being pulled apart right before our eyes.

“This is a call to action for the Canadian government and for the provincial governments to take the opportunity to create as many jobs in Canada as they can and depend on lot less on the Americans, who’ve proven to be less reliable in terms of supply chains.”

Kim Truter is the chief executive officer of Burgundy Diamond Mines, which owns the NWT’s Ekati mine. In an emailed statement at the start of February, Truter said that “as the situation with Canada and US tariffs is both fluid and unfolding, we don’t believe it is helpful to speculate at this stage.”

“We pre-purchase most of our supplies for the year ahead, so are naturally hedged against medium-term input turmoil,” Truter said.

“Our diamond sales occur in Antwerp to mostly traders and manufacturers who are largely based in India. We don’t anticipate any issues at this stage. “

What about the long term?

Clinton said most economists look at the US tariff announcements “with bewilderment.”

“This is absolutely the wrong way to go. It makes the world less efficient. It makes goods more expensive. It uses more energy, you know, so even from a climate change perspective, it’s not a good idea,” said Clinton.

“It’s a bad idea to artificially make things more expensive and make production more difficult, and will cause hardships on both sides of the border.”

“It doesn’t make any sense from an economics perspective,” he said, while acknowledging: “I don’t think that economics is what’s driving this, except to say that the US government has two agendas.”

One could be promoting the manufacturing sector within the US. The other could be generating revenue for the government “to pay for some of the promises they’ve made,” Clinton said. For example, tariffs like the one on oil could help the Trump administration generate cash to pay for promised tax cuts.

Canada’s political response of its own tariffs is one Clinton could “fully understand and appreciate,” but he said it, too, did not make good economic sense.

“In Canada, we’re going to have to lean pretty heavily on what’s called our social safety net, our employment insurance and other mechanisms that support Canadians through hard economic times, and that’s what we’re facing.”

In the weeks since the 30-day pause was announced, Canada’s provinces and territories have accelerated work on internal measures that could at least provide mild insulation from tariffs’ impact.

For example, there is renewed enthusiasm for the dismantling of trade barriers between Canadian jurisdictions.

Last week, NWT industry minister Caitlin Cleveland chaired a meeting of Canada’s Committee on Internal Trade – a body of ministers from provinces and territories looking at how trade between them can be improved.

That committee says it is working on a “rapid review” of some internal trade obstacles, a pilot program in trucking, ways of improving “labour mobility” and new sales systems for alcohol.

That work could produce some lasting changes. But more broadly, lasting change is exactly what Clinton fears is coming.

Clinton said his biggest concern is that the approach to tariffs outlined over recent weeks would most likely not be a one-week or one-month temporary measure to be endured.

If they happen, he said, tariffs would likely remain “in place for a longer period of time” to have the effects the US desires, like changing consumer purchasing patterns and reshaping the nation’s manufacturing sector.

“It scares me to say, but it could be years,” said Clinton.