Posthaste: If a 15% tariff is the ‘new normal,’ would that be a ‘tough pill’ for Canada?

Fifteen per cent appears to be the new magic number for a U.S.

tariff rate after Japan and the Americans announced a trade deal, with the European Union now signed up too and South Korea apparently headed in the same direction.

With the Aug. 1 deadline to make a trade deal with the United States rapidly approaching, “it seems the U.S. is intent on raising the stakes,”  Jeremy Stretch, chief international strategist at CIBC fixed income currencies and commodities, said in a note Thursday after U.S. President

Donald Trump indicated his latest intention around tariffs was to “have a straight, simple tariff of anywhere between 15 per cent and 50 per cent” with the higher rate probably targeted at countries that “we (the U.S.) haven’t been getting along with.”

If 15 per cent is the “new normal” as Stretch wondered, what does that mean for Canada?

“First of all, we have to be sure that that’s actually going to apply to Canada as well,” Douglas Porter, chief economist at BMO Economics, said, noting that Canada has been in a “really different situation” from most other countries.

For example, the “vast” majority of exports to the U.S. are not being tariffed if they are compliant with the

Canada-U.S.-Mexico Agreement (CUSMA). Then there are the outliers including steel and aluminum , currently being tariffed at 50 per cent and the non-U.S. produced portions of vehicles facing duties of 25 per cent.

“If we were to apply a 15 per cent tariff across the board, I would actually say on net, that would be bad news,” Porter said, adding that BMO currently estimates that the average effective tariff rate for Canadian exports to the U.S. is seven per cent, based on the weighted average of what was exported last year.

“I suppose the counterpoint is maybe we’re headed for something worse when the president really turns his attention to reviewing the (CUSMA) and maybe 15 will end up not being such a bad spot. But that said, that would be a tough pill to swallow for Canada,” Porter said.

Michael Davenport, Canada economist at Oxford Economics Ltd., said 15 per cent “would be a positive development” instead of the 35 per cent Trump threatened to hit all non-compliant CUSMA imports with starting on Aug. 1 if no trade deal is reached.

“I think it’s hard to say whether or not that’s ultimately where the level of tariffs are going to settle, particularly for Canada. We’ve seen the negotiations with Canada and Mexico be a little bit different,” Davenport said, citing the CUSMA exemptions.

Also, when Trump unveiled his reciprocal tariffs bombshell on April 2, Canada and Mexico were exempt from levies that ranged from 10 per cent to as high as 50 per cent, depending on the country.

Oxford has a base case for Canadian trade talks with the U.S. which assumes that CUSMA will be renegotiated and that most trade will be tariff-free except for 10 per cent duties on base metals including aluminum and steel and some agricultural products and “that’s because those are the areas that it sort of makes the most sense for the U.S. to continue to pursue higher tariffs against Canada,” Davenport said. CUSMA is scheduled for joint review starting in July 2026.

But, Davenport thinks Aug. 1 remains crucial to the path trade pursues.

“We really think that the trade deal is at a crossroads, right? And depending on what happens between now and Aug. 1, we could see improved prospects for growth or a gloomier and worse economic outlook,” he said.

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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