Manitoba has few options to ‘Trump-proof’ its economy in next 30 days, experts say

Posted on February 5, 2025 by Peggy

Manitoba’s premier says he wants to reduce the province’s reliance on trade with the United States after potential tariffs on Canadian goods were put on hold, but experts say it’s not as simple as it sounds.

Although U.S. President Donald Trump’s long-promised 25 per cent tariffs on Canadian goods were paused for 30 days on Monday, Premier Wab Kinew said Manitoba still needs to diversify its exports and boost its production capabilities in order to decrease reliance on the U.S. market.

“It’s very clear that we have to start planning our economy to be more resilient, and to be able to withstand these sort of situations, so that we don’t find ourselves in a similar position going forward,” he said.

While the reprieve may give businesses some room to build up inventories and explore potential alternative suppliers or markets, it’s not nearly enough time to make substantial structural changes in terms of production, a University of Manitoba economics professor says.

“In general, I would say 30 days is not a whole lot of time, and for big, big export volumes and big projects, it’s nowhere near going to be close enough,” said Fletcher Baragar.

But Manitoba does have options when it comes to playing the long game, with a $36.4-million investment in the Port of Churchill announced by the provincial government Tuesday just one way to help explore other global markets for Manitoba’s large bulk commodity exports, he said.

Manitoba’s top exports to the U.S. in 2023 were medicine, canola, hydroelectric power, frozen potatoes and other vegetables, as well as crude oil, according to the Manitoba Bureau of Statistics. That year, Manitoba exported about $15.5 billion worth of goods across the southern border, but it imported just over $23 billion, data from Statistics Canada shows.

A man sitting in front of a computer. — Fletcher Baragar, an economics professor at the University of Manitoba, says Canada should join forces with other nations facing Trump tariff threats — like Mexico, China and potentially the European Union — in order to strengthen economic ties over the next four years. (Karen Pauls/CBC)

Baragar has concerns about that trade difference if the U.S. tariffs do come to fruition, because Manitoba’s agricultural industry is a big part of the province’s economy and relies heavily on fertilizer, equipment and machinery imported from down south, he said.

“Certainly, Canada has some capacity to provide those crucial products, but to build up the capacity to supply the Canadian market entirely is, again, one of those things that’s not going to happen in 30 days,” Baragar said. “That’s going to take perhaps a year or two or three, perhaps longer, to adjust production.”

Governments may need to provide some form of short-term financial assistance to farmers if Trump’s tariffs hit the agricultural sector, he said.

The tariffs would create “a seismic shock” for Canada’s economy, but Baragar says they’re now in a 30-day cloud of uncertainty, and no one can say for certain how long the threat of a U.S. trade war will last.

Even if Trump did impose tariffs for the entirety of his four-year term as president, there’s a reasonable possibility that his successor would eliminate them, Baragar said. However, the uncertainty could dissuade businesses from investing in and boosting manufacturing capacity in Manitoba.

On a broader scale, he says Canada should join forces with other nations facing Trump tariff threats — like Mexico, China and potentially the European Union — in order to strengthen their own economic ties over the next four years.

“There’s possibilities here that haven’t been fully explored yet.”

Hard truths, silver linings

Among the reasons given for the tariffs, Trump has said they were to punish Canada for being lax on drugs and migrants, even though the U.S. government’s figures show less than one per cent of fentanyl and illegal migrants are coming from this country. He’s also cited inaccurate trade deficit figures.

If the tariffs are imposed, the added costs could make some Canadian goods less competitive compared to those made in the U.S. or coming from other countries.

Buying local and working on eliminating interprovincial trade barriers are a couple of the more obvious ways Canada could boost its economy in the next 30 days, said Barry Prentice, director of the University of Manitoba’s Transport Institute at the Asper School of Business.

“That we can do, and they don’t take a long time,” he said.

“Beyond that, you know, it’s pretty hard to turn the ship around.”

However, Prentice says he doesn’t believe Trump will ever follow through on his tariff threats, as global markets saw sharp losses Monday before the 30-day pauses were announced.

“The cost to [Trump] politically, and the U.S. in general, is just too great,” he said.

Prentice also notes that making changes to the current supply chains between Canada and the U.S. wouldn’t be as simple as some might think.

“When you have established contacts and products and what have you, you don’t just instantly shift and buy from somebody else,” he said.

“The question always is, who is that somebody else? Because the reason you’re buying from Canada, from Manitoba in the first place, is that we have good prices and good quality, and we’re handy, we’re reliable — and you don’t just immediately switch out of that.”

A man in a suit stands and looks at the camera. — Barry Prentice, director of the University of Manitoba’s Transport Institute at the Asper School of Business, says while it’s ‘pretty hard to turn the ship around’ on trade and manufacturing, he doesn’t believe Trump will ever follow through on his tariff threats. (Submitted by Barry Prentice)

Trump’s tariff threats fail to recognize that a lot of Canada’s trade with the U.S. is made up of semi-finished goods, said Prentice.

“In other words, we sell things that go into making things in the U.S., and sometimes across the border more than once, so if you put tariffs on those sorts of things, then you make your own industry less competitive.”

However, the situation has presented a sort of silver lining, he said, forcing Canada to reckon with its fentanyl problem and illegal border crossings.

“If nothing else, this has caused Canadians to take a hard look in the mirror, and maybe reconsider some things that we take for granted.”