Canada's broader growth outlook remains intact despite last week's proposed 50% US tariffs, with the measures affecting only a small portion of bilateral trade according to RBC Economics.
While the broader Canadian economy is expected to remain resilient, the impact is likely to be concentrated in sectors such as plastics, electrical machinery, furniture and home appliance manufacturing, mirroring the sector-specific weakness that followed earlier US Section 232 tariffs on autos and steel, wrote RBC in a Friday note.
The new tariffs would affect roughly 5% of Canada's exports to the US, leaving more than 80% duty-free. The average effective US tariff on Canadian imports would rise from about 3% to 5.5%, the bank calculated.
Unlike tariffs on products such as aluminum, where Canada supplied a dominant share of US imports and American buyers had limited alternatives, the latest measures target products that account for just 3.7% of US imports in those categories, giving US importers greater scope to source from other suppliers, said RBC.
As a consequence, the burden is likely to fall more heavily on Canadian exporters, which have far fewer alternative markets. In 2025, around 81% of Canada's exports of the newly tariffed products were destined for the United States, rising to 92% for plastics and related products.
As a result, while the overall macroeconomic impact is expected to remain limited, reducing reliance on the US market will remain a longer-term challenge for Canada, added the bank.