Research from the Canadian Chamber of Commerce suggests that, out of 41 Canadian cities, Ottawa-Gatineau will see relatively less impact from U.S. tariffs.
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Research from the Canadian Chamber of Commerce suggests that, out of 41 Canadian cities, Ottawa-Gatineau will see relatively less impact from U.S. tariffs.
In a recent report, the chamber said the proposed tariffs would lead to significant challenges for the economies of both countries, potentially leading to a recession. But across Canada, the impacts on municipal economies could vary dramatically.
“The conversation has been mostly at the national and provincial level, so our team wanted to better understand where these impacts would be felt closer to home,” principal economist Andrew DiCapua told OBJ on Tuesday.
“We wanted to get a sense of the relative vulnerability that some of these cities would have compared to the Canadian average.”
As major exporters to the U.S. market, the provinces of Alberta, Ontario and New Brunswick are particularly vulnerable, the report said, with St. John’s, Calgary and Windsor the cities most at risk.
The chamber’s data lab developed a tariff exposure index, which analyzed the intensity of each city’s trade south of the border and its dependence on the U.S. as an export destination.
“We know that Canada, broadly, is pretty exposed to the U.S. market,” said DiCapua. “About 75 per cent of our export goods head to the States. So we’re looking at the share of those exports to the United States and the share of exports as a percentage of the GDP. If there was a reduction in exports to the States, how much would that actually hit the local economies' bottom line?”
Out of the 41 Canadian cities, Ottawa-Gatineau’s vulnerability to tariffs ranked 29th, with a tariff exposure index calculated as 10.9 per cent below the national average. In Eastern Ontario, Kingston’s risk was slightly higher, ranking 25th with a tariff exposure index of 6.9 per cent below the national average.
“It’s a relative measure and trying to get a sense of where some of the pain points are,” said DiCapua. “So from that perspective, it looks like (Ottawa-Gatineau) is relatively well-positioned if tariffs take effect. When you look at goods exports as a share of GDP, Ottawa ranks pretty low. It only represents eight per cent of the local economy.”
He added that Ottawa’s relatively low risk is likely because of the diversity of its economy, which relies heavily on industries such as tourism, government and other service-based sectors.
Cities that ranked high, DiCapua said, tended to rely more on export-heavy industries like energy, forestry and manufacturing. Because of their reliance on the U.S., those cities are more likely to see significant impacts to employment, funding, local services and other aspects of the economy.
According to the report, cities near the bottom of the ranking are “less exposed to the tariffs because they trade less intensively with the U.S. and/or have more diversified trade patterns.”
Ottawa-Gatineau, the report found, exports $8,093.7 million worth of goods, or $5,028 per capita. That represents a 76.1 per cent share of total exports and an 8.4 per cent share of GDP.
But even if a city like Ottawa is at low risk, DiCapua said the overarching national impacts of tariffs will be unavoidable for all cities.
“There are going to be a lot of pain points,” he said. “If companies aren’t able to sell as many goods to the U.S., that could hit companies’ bottom lines and result in layoffs. Unemployment could rise and if people aren’t working they aren’t contributing to the local economy and paying taxes. This would have a disproportionate impact on local economies in terms of ability to raise revenues and to thrive.”
The chamber also cautioned that the situation between the U.S. is “fluid.”
“The economic damage done depends heavily on how long these tariffs are in place, or threatened,” the report said. “We expect more volatility and weakness in the Canadian dollar, which will partly act as a shock absorber. The ability of Canadian exporters to find alternative markets varies greatly, and is generally easier for bulk commodities than for specialized machinery, equipment and parts.”
Last month, Richard Forbes, principal economist for the Conference Board of Canada, said that while tariffs could hit other Canadian cities hard, direct impacts in the nation’s capital should be minimal.
“Compared to other cities in the Canadian economy, Ottawa and Gatineau are pretty sheltered from potential tariffs from the United States,” he told OBJ. “It’s because the city is so concentrated in services. Nearly a quarter of jobs are in public services, but there’s also a pretty big presence in things like professional services, financial services, things that aren’t really tied to exports.”
Still, the Conference Board report predicted that no city in Canada will be completely immune to blanket tariffs, “which would reignite inflation, stifling consumer spending and business investment,” and also create a level of uncertainty around 2025 predictions.
