OTTAWA — The best way to retaliate against U.S. President Donald Trump’s on-again, off-again tariffs is through Canadians’ stomachs, analysis commissioned by the Public Policy Forum suggests. 

Putting retaliatory tariffs on food imports from the U.S. does more damage to the U.S. economy than Canada’s, by a far wider margin than applying them to other products, according to the analysis by Navius Research, a Vancouver-based consultancy whose services include economic modelling. 

The assessment is part of a policy memo on Canada’s trade-war options released Friday by the Public Policy Forum, a non-partisan think tank based in Ottawa. While it notes that any retaliation will hurt Canadians as well as Americans, the analysis estimates that a 25 per cent levy on American grocery products would lower the U.S. GDP by US$22 billion more than the Canadian GDP. 

Pharmaceuticals and fabricated metals are also near the top of the list of effective targets for counter-tariffs. So are alcohol and tobacco, which Canada is already sanctioning: the authors anticipate a 25 per cent tariff on booze and tobacco would take a bite US$7.15 billion bigger out of America’s GDP than it would out of Canada’s.

“Those are things where we have substitutes available. We have our own agricultural sector, we have international options to buy from Chile or other places,” said Mark Cameron, a Public Policy Forum fellow who co-authored the report. “That has a pretty immediate, direct impact on the U.S.” The report reads like a battle plan that lays out defensive strategies to punch back at the U.S. with the least collateral damage in Canada.

The key, the authors say, is to avoid tariffs on goods tied up in Canadian supply chains, like vehicle manufacturing, as well as things Canadian companies invest in to grow, like machinery. Taxing energy imports is also likely to inflict undue damage on Canada’s economy, the report finds.

“Anything where we are sending our natural resources or raw materials down to the U.S. we are, to some extent, penalizing ourselves by putting counter-tariffs on,” Cameron said. 

Trump first announced his intention to impose 25 per cent tariffs on Canadian and Mexican imports in February, but paused the implementation until Tuesday. Then, just two days after the tariffs went into effect, he pulled an about-face, announcing a reprieve on goods covered under the United States-Mexico-Canada Agreement until April 2. 

Ottawa already unleashed its first wave of retaliation Tuesday with a 25 per cent tariff on $30-billion worth of U.S. goods including groceries, cosmetics and alcohol. After the U.S. pullback on goods covered by the USMCA, Finance Minister Dominic LeBlanc said his government is prepared to follow up with 25 per cent tariffs on an additional $125 billion worth of goods on April 2 if the trade war continues.

The initial list of counter-tariffs closely aligns with the Public Policy Forum’s conclusions in the report, Cameron said. Already the Kentucky Distillers’ Association has reacted with alarm at the impact on the state’s renowned whiskey. “Bourbon jobs are American jobs, and we grow bourbon jobs by opening markets across the globe,” said the association president Eric Gregory. “Retaliatory measures against bourbon harm these markets and jeopardize growth for years to come.”

The longer list of potential targets, however, requires consultation with affected industries because Ottawa worries about negative implications within Canada, Cameron said. He suggested the government consider larger tariffs on sectors where Americans will feel the wallop most. “There may be some sectors where we don’t want to apply any counter-tariffs, but there may be sectors, like alcohol and tobacco, where we may want to have 50 per cent or 100 per cent tariffs,” he said. 

While Trump’s officials have mused about carve-outs for specific industries, like the auto sector, Cameron said Canadians need to be united in their response. The Navius analysis found every region of the country has sectors that depend on close trade ties with the U.S. “This is true whether you look at gasoline and diesel refined in New Brunswick, aluminum exported from Quebec, steel and automobiles from Ontario, potash and uranium from Saskatchewan or oil and gas from Alberta,” the report says. 

The analysis predicts Ontario will be hit hardest, with Trump’s tariffs on the auto sector taking an estimated $93.8 billion out of Canada’s GDP. Out west, Alberta’s oil and gas sector faces a $46.6 billion reduction to GDP, while Atlantic Canada’s metal mining, oil refining and fisheries are also projected to lose billions. 

With such widespread potential damage, the report warns, “We can’t afford to be split along regional lines, as Canada and Canadians are prone to do.”