In recent weeks, Canada has faced an unprecedented level of uncertainty, driven by federal politics, domestic policy debates, and major international trade tensions—especially the disruptive potential of tariffs.
A leading index of economic policy uncertainty, updated to include January 2025, shows Canada hitting a record high—surpassing even the peak uncertainty of the early COVID-19 months.
Graphic credit: Janice Nelson.
Just in the past few days, tariffs were announced, retaliatory measures detailed, and then—just as quickly—tariffs delayed by 30 days.
This rollercoaster is far from over. If the new U.S. administration’s goal is to create instability, it’s succeeding. It’s the era, as Anne Applebaum puts it, “performative trade war.”
But even if just performative, there are lessons in how Canada responded in recent days. Ones we should reflect on, and limitations we need to accept, to better prepare for the worst.
So how did Canada respond over the weekend?
We saw procurement contracts with American firms suspended. Liquor retailers pulled U.S. products, urging consumers to buy Canadian. The federal government also announced tariffs on $30 billion worth of imports.
While these moves likely had strong public support, none would seriously impact the U.S. economy.
That’s not to say they’re pointless. Symbolic retaliation has value when paired with a smart communications and government relations strategy targeting key U.S. decision-makers. But Canadians shouldn’t mistake these measures for ones that will impose meaningful economic costs south of the border—despite that being the stated aim.
Let’s start with booze.
Alcohol imports from the United States are relatively limited. Last year, Canada purchased roughly $1.5 billion worth of beer, wine, and liquor from the U.S., making up about a quarter of our total alcohol spending. While that’s a notable share of Canada’s purchases, it accounts for only about 0.5 percent of total U.S. alcohol production. Even if Canadian demand for U.S. products dropped by 20 percent—a substantial shift—the impact on total U.S. output would be just 0.1 percent.
What about government purchases?
In 2022, Canadian governments bought about $31 billion in goods and services from the U.S., but much of this is hard to replace. This includes $5 billion in machinery and equipment and $11 billion in medical equipment and pharmaceuticals, where domestic alternatives are limited. Relative to the U.S. economy, these purchases amount to just 0.05 percent of total output. Even a sharp reduction in Canadian government spending on U.S. goods would barely make a dent south of the border.
