Trump's tariff war: Why Canada may be 'in the best position of any other country'
Canadian companies could be among the winners once the dust settles in U.S. President Donald Trump's global trade war, according to PricewaterhouseCoopers (PWC) Canada. An economist at the 'big four' accounting and consulting firm says certain Canadian exporters have a unique opportunity for growth in the U.S. market as products from China face tougher trade hurdles.
Trump was spotted at this week's G7 meeting in Alberta wearing a lapel pin featuring American and Canadian flags. The U.S. president left the summit early on Monday, delaying potential strides by leaders in attendance to address the ongoing U.S.-led trade war. Trump and Prime Minister Mark Carney agreed at the event to strike a deal in 30 days that could resolve the trade conflict between the neighbouring nations.
Michael Dobner, PwC Canada's national leader of economics and policy practice, says the current weighted average tariff rate applied to U.S. imports from Canada 'is likely the lowest of any country in the world.'
While the Trump administration has placed punishing 50 per cent levies on Canadian steel and aluminum, as well as tariffs on certain automotive imports, the wide slate of goods compliant with the Canada-United States-Mexico Agreement (CUSMA) are currently exempt.
Canada is maybe in the best position of any other countryMichael Dobner, PwC Canada's national leader of economics and policy practice
'Canada is maybe in the best position of any other country,' Dobner told Yahoo Finance Canada on Tuesday. 'The negotiation between Canada and the U.S. may further cement Canada's position over other countries as an exporter to the U.S.'
This is especially true, he says, for Canadian companies competing against Chinese rivals for buyers in the American market in sectors like industrial equipment and building materials.
'We're going in the right direction as far as the U.S.,' Dobner said. 'If this is cemented in a trade deal with Canada only, Mexico isn't even involved, then that actually puts Canada in a very good position that may make Canada an interesting investment opportunity for foreign companies if they want access to the U.S.'
PwC Canada says tighter trade ties between Canada and the U.S. could brighten the former's economic outlook as early as 2026. In a report published on Wednesday, the firm calls for Canadian gross domestic product (GDP) growth to remain well below one per cent for the remainder of 2025.
Statistics Canada's latest GDP reading shows the economy grew at an annual rate of 2.2 per cent in the first quarter. Earlier this month, the Bank of Canada warned the economy will be "substantially weaker" in the second quarter of 2025, versus the start of the year as the full impact of U.S. import tariffs hits Canadian businesses.
On Wednesday, Bank of Canada Governor Tiff Macklem called Carney and Trump's 30-day timeline for a trade deal 'very welcome news.'
'New U.S. tariffs have already shaken Canadian exporters. After an initial pull forward to get ahead of tariffs, exports to the United States have fallen sharply,' Macklem told reporters in Newfoundland and Labrador.
In its 2025 mid-year Canadian M&A update released on Wednesday, PwC Canada says the volume and value of merger and acquisition deals between January and the end of May fell to 996 and $134 billion, respectively. Significant transaction announcements included Sunoco's (SUN) US$9.1 billion bid for Canadian fuel distributor Parkland (PKI.TO), and Whitecap Resources' (WCP.TO) $15 billion acquisition of Veren.
"It's a little bit too early to assess the impact of tariffs and uncertainty," Dobner said. "You need another quarter to see whether this is going to have a strong impact."
In the prior period, from July 1 to Nov. 30, 2024, PwC Canada tallied 1,068 deals, with a total value of $227 billion. Prior to the trade war, Dobner says PwC Canada expected falling interest rates to fuel a rise in dealmaking this year. Now, he says 'cautious optimism' about a Canada-U.S. deal to enhance trade ties has shifted those hopes to 2026.
'We could see meaningful improvements in Canada's economic outlook potentially beginning as early as 2026,' PwC Canada wrote in its report. 'We could also see increased transaction activity in the same time frame, particularly among companies positioned to participate, or pivot towards supply chains, in sectors such as infrastructure development and financing, defence, agri-food, AI applications, nuclear energy and natural resources.'
According to a report in February from Kroll, a New York-based financial risk and advisory firm, corporate cash balances are at an all-time high in Canada, a positive sign for near-term M&A.
'There is an abundance of dry powder that private equity firms will eventually need to deploy,' wrote Howard Johnson, Kroll's head of Canadian M&A advisory, and country leader.
'Once buyers and sellers understand the scope of new trade policies, deal activity is expected to ramp up quickly.'
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist.
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