🔒US-Canada trade tensions raise red flags for Maine businesses

A flare-up in trade tensions between the United States and Canada has some experts concerned about the potential impact on Maine businesses and the economy.

After the two sides failed to reach a trade deal, the White House on Saturday imposed 50% tariffs on about $20 billion worth of goods from Canada.

On Monday, President Donald Trump threatened to increase tariffs on cars, trucks and auto parts from Maine's top trading partner, as well as steel, posting in all caps that “we don’t need Canada, they need us.”

Canada fired back Tuesday, announcing retaliatory tariffs of up to 50% on about $20 billion worth of U.S. imports, including steel, dairy products and pulp and paper. The tariffs are set to take effect Sept. 8.

Even before the Canadian response, Maine experts were raising red flags about the potential fallout from renewed tensions for Maine businesses and the state’s economy.

Oak McCoy, an economics professor at the University of New England’s College of Business, said he expects construction and real estate development to be among Maine industries most immediately affected by the new U.S. import taxes. That’s especially true for firms that rely on Canadian cement, wood products, furniture, fixtures and other building materials.

“Even when tariffed inputs represent a relatively small share of total project costs, a few percentage points added to the cost of a large development can be enough to delay a project or make financing more difficult,” he said.

McCoy also expects retail, food and hospitality businesses to feel the effects of higher costs for Canadian food products, beverages and other consumer goods, with Maine manufacturers also potentially exposed if they buy materials from a U.S. distributor that sources them from Canada.

“The other major concern for Maine is retaliation,” he warned. “Canada is Maine’s largest export market, so the state is unusually exposed to a trade conflict in both directions.”

He cautions that the longer the dispute lasts —  and particularly the more the rules change — the larger the economic costs are likely to become.

“Maine's close economic relationship with Canada is normally an advantage,” he said. “In a prolonged trade dispute, that same integration makes the state unusually vulnerable.”

He also pointed to a historical concern over a possible “feedback loop” of repeated tariffs and countermeasures, with businesses in both countries facing higher costs and fewer customers.

Potential escalation

Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce, sees less cause for immediate concern about the impact of U.S. tariffs on Maine businesses.

“These tariffs are material, but they will not have broad macroeconomic impacts on Maine,” he said. “However, I am concerned about potential escalation and where this could lead to dramatic impacts on the Maine economy if it encompasses more forest products, fisheries and energy.”

‘Embrace the changes’

Kevin French, chairman and CEO of Scarborough-based Landry/French Construction, is taking a longer-term view on tariffs.

“We are urging owners not to delay projects, but instead to embrace the tariff changes expected to take effect on Jan. 1 and allow us to pre-purchase steel and other affected materials as soon as possible to avoid increased costs,” he said.

“The real question is whether the president follows through with the threatened tariffs or whether this is positioning for further negotiations with Canada," he added. “We need to stay concerned and plan accordingly, but we also don’t want to prematurely panic and drive costs up unnecessarily.”