MNI INTERVIEW: Canada Exports Can Grow This Yr Despite Tariffs

Growing Canadian exports this year remains possible even with the U.S. trade war as new oil and gas terminals open up overseas markets and other firms take advantage of tariff rates still below global competitors, the government trade bank’s deputy chief economist told MNI.

“Even with trade struggling on a headline level that's been really driven by the decline of exports to the United States since the start of the second quarter, we are continuing to see growth other markets,” Ross Prusakowski of Export Development Canada said in an interview. Those shipments have reached record highs this year according to Statistics Canada, slimming a record overall trade deficit after U.S. tariffs took effect.

Like the Bank of Canada, EDC is using economic scenarios amid shifting U.S. trade policies, and Prusakowski said outcomes have improved in recent months and the optimistic case includes a modest export gain.

The United States has waived the 25% tariff on goods that comply with rules under the trade agreement Trump signed in his first term, and now 90% of eligible shipments are being made under that exemption, EDC estimates. “That CUSMA carve-out is positive, and actually puts Canadian exporters on a relatively more favorable position than many other countries. As we're seeing the letters from the U.S. administration go out the last week or two, rates for other countries that are targeted for Aug. 1 are much higher than even what we're facing,” Prusakowski said.

ENERGY PUSH

Exports will also be boosted by the first full year of service of the expanded Trans Mountain pipeline and the recent start of LNG shipments from the west coast, Prusakowski said. “We're going to see a pretty notable boost, just given the size of those projects, to the overall Canadian trade.”

Further gains can come if firms continue tapping into the Indo-Pacfic and opportunities from the Canada-EU trade pact, Prusakowski said. Faster growth in emerging markets bodes well for traditional Canadian exports of food, consumer goods and equipment. (See: MNI: Carney Has Support To Break Longtime Big Project Barriers)

“Companies are weathering this better than certainly some of the scenarios that we were producing as of the first couple of weeks of January,” he said.

MILD RECESSION

Canada still faces a mild recession in the second and third quarters linked to damage from Donald Trump’s broad 25% tariff and other levies on autos, steel and aluminum, Prusakowski said. Strong first-quarter growth as American customers stockpiled goods before tariffs took effect and a fourth-quarter rebound means GDP will grow 0.8% this year, EDC predicts. 

That's after overcoming another drag with Canada’s dollar defying the normal pattern in a slowdown by strengthening as global investors question the stability of the U.S. dollar, according to the group, one of the only government agencies that forecasts the currency.

Whether or not exports deliver a modest increase or decrease in 2025 depends on how vigorously the U.S. applies tariffs, he said. But it's too much to say Canada will benefit from relatively lower tariffs amid global tensions. “Even if we have a relatively lower rate, the slowing of the U.S. economy is still going to hit exporters in the Canadian economy directly,” he said. (See: MNI: Canada Recession Looms On Tariffs And Hot CAD, EDC Says)