Last week's US tariff threat marks a setback, with broad implications across Canadian provinces and industries, particularly in Ontario, Quebec, and British Columbia, according to KPMG Canada in a note.
While the measures appear more substantial than previous announcements, their overall economic impact is likely to remain manageable, said KPMG Canada in its late Friday note.
"Not good news, but the Canadian economy isn't going to break under these tariffs," wrote Ali Jaffery, chief economist at KPMG Canada. "These tariffs hit wide but not deep, for the simple reason that the US doesn't want to inflict pain on itself."
Most of the economic damage from earlier US sectoral tariffs has already been realized, shaving just over 1% from gross domestic product since early 2025. The new tariffs could reduce GDP by a further 0.3% by year-end if maintained, added Jaffery.
However, they are unlikely to derail Canada's recovery, which continues to be supported by a robust energy sector, improving labor conditions, resilient household spending and expansionary fiscal policy.
The greater challenge for Canada lies in addressing long-standing competitiveness and productivity constraints while adapting to an increasingly protectionist global environment, said KPMG Canada.
Rather than focusing only on tariff mitigation, Canada must continue to build on its competitive strengths -- especially in high-value industries and services, where its global standing has steadily improved, according to Jaffery.
"We should not confuse a real economic hit with an economic catastrophe," he wrote. "Canada has work to do, but it also has more resilience, more leverage and more sources of strength than the headlines suggest."