What the Canada-U.S. tariff war means for Kawartha Lakes

For Kawartha Lakes, the biggest risks may show up in manufacturing orders, farm equipment costs, business investment and eventually household prices

Analysis

Canada and the United States failed to reach a trade agreement Friday night, triggering new 50 per cent U.S. tariffs on roughly $28 billion worth of Canadian export goods to the US. Prime Minister Mark Carney suspended the talks and said Canada will respond with matching tariffs “dollar for dollar” on American goods imported to Canada.

Ontario Premier Doug Ford backed Prime Minister Mark Carney after talks were suspended, calling for a united “Team Canada” response and supporting matching tariffs “dollar for dollar.” Ford said Ontario is ready to do its part.

In Kawartha Lakes, the effects will depend heavily on our local economy. Manufacturing and agriculture are especially important here, and the trade dispute could affect them in very different ways. Local manufacturers may face pressure on the products they sell, while farmers — especially those in supply-managed sectors — may be more exposed through the equipment, machinery and parts they buy.

A Lindsay manufacturer may sell industrial machinery directly into the United States, or it may supply another Ontario company that does. If an American customer cancels an order because a Canadian product has become too expensive with US tariffs added, the effect can work its way back through the supply chain to Kawartha Lakes. Canadian retaliation could create another pressure if local firms rely on U.S.-made machinery, components or equipment that become subject to Canada’s retaliatory tariffs on US exports to Canada.

The City’s 2024 Business Count surveyed 762 businesses and employment properties representing 7,186 jobs. Sixty-two per cent were independent businesses, while 64 per cent said they planned to hire and 12 per cent planned to expand their floor space. Trade uncertainty can affect those plans before it causes layoffs, as businesses delay equipment purchases, expansions or hiring while they wait to see whether customers, suppliers and tariff rates remain stable.

Agriculture is another major part of the Kawartha Lakes economy, but the tariff story for local farmers is different. Kawartha Lakes has more than 75 dairy, poultry and egg producers, according to the City. They are part of an industry estimated at about $300 million, with related businesses supporting more than 1,000 local jobs.

Those farmers are somewhat protected from the immediate risk of losing American customers because supply-managed products such as milk, poultry and eggs are produced mainly for Ontario and Canadian markets, with limited direct exposure to U.S. customers. The supply-management system uses production quotas, regulated pricing mechanisms and controls on imports to closely match domestic supply with demand.

Their more immediate tariff risk may be on the cost side. Modern dairy, poultry and egg farms depend on tractors, implements, replacement parts and specialized feeding, milking, ventilation and other equipment. These operations run year-round, and essential repairs often cannot be delayed without affecting production or animal care.

Some of that machinery and equipment is sourced from the United States. If Canada’s retaliatory tariffs include U.S.-made farm machinery or parts, those products could become more expensive. Equipment made in Japan, South Korea, Europe or elsewhere may not face the same tariff, potentially changing purchasing decisions on local farms. The effect will depend on where a particular machine or part is actually manufactured, because tariffs generally depend on country of origin rather than the nationality of the brand.

For farmers with an existing fleet of equipment, switching brands is not always simple. They may still need compatible parts, attachments, software and local dealer service. A higher-priced replacement part during planting or harvest can be much harder to avoid than delaying the purchase of a new tractor.

Supply management is a much bigger issue in Ontario and Quebec than in many other provinces because of the concentration of dairy, poultry and egg production. Farm organizations have strongly opposed giving the United States additional access to the Canadian market, and the issue is particularly important in Kawartha Lakes, where more than 75 supply-managed farms support a wider network of agricultural businesses and jobs. For consumers, greater U.S. access could mean more competition and choice, but it would not necessarily translate directly into lower grocery prices.

Changes in farm costs can also move through the wider local economy. Farmers buy feed, fuel and equipment, hire contractors, veterinarians and mechanics, and invest in barns and other buildings. A tractor purchase that is delayed affects an equipment dealer, while a postponed barn renovation affects a contractor.

Most residents are unlikely to feel the full impact of the trade dispute immediately. Businesses that export directly to the United States or regularly import affected American goods could feel pressure within weeks through cancelled orders, higher costs or supplier changes. If the dispute lasts several months, the effects may become more visible in overtime, hiring, investment and prices.

A longer conflict could also affect construction costs if tariffs raise the price of equipment, appliances, metals or other materials moving through North American supply chains. A tariff on one product will not raise the cost of a house by the same amount, but several higher input costs can add up, especially if suppliers become uncertain about what replacement stock will cost in the months ahead.

The timing matters. A short dispute could be absorbed by many businesses. A six-month or year-long conflict would create more pressure on investment decisions and could lead companies and farms to change suppliers, markets or expansion plans.

A prolonged slowdown could eventually create pressure on the Ontario government’s finances as well. The province relies heavily on income, corporate and sales taxes, so weaker profits, slower hiring and lower household spending can reduce provincial revenue. That does not mean the new tariffs will immediately reduce funding for hospitals, schools or municipalities, but weaker growth over several quarters would leave Queen’s Park with less room to fund public services while also supporting industries and workers affected by the trade dispute.

For Kawartha Lakes, the clearest early signs will likely be changes in manufacturing orders, farm equipment prices, machinery purchases, hiring and business investment. The exact Canadian retaliatory tariff list will also matter because it will show whether U.S.-made tractors, farm implements, replacement parts, manufacturing equipment or building products are directly affected. Ottawa could choose to exempt certain types of equipment or parts from the retaliatory tariffs, so the impact on local farms and businesses will depend on the final product list.

Our local story will not be the same as the national one. For manufacturers, the biggest risk may be losing customers. For Kawartha Lakes farmers, the bigger risk may be paying more for what they need to keep operating. If the dispute lasts, both could feed into slower hiring, weaker investment and higher costs across the community.