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Economic Viewpoint

Where Could Tariffs Go from Here?

Rethinking Impacts in a Shifting Trade Landscape

January 21, 2026
LJ Valencia, Economist • Samuel Turcotte, Analyst

Highlights

  • The average effective tariff rate (AETR) is a key measure of how tariffs are applied on US imports of Canadian goods. It reflects the actual duties paid at the border, based on a mix of products the US imports from Canada.
  • Recently, the gap between the actual AETR and the predicted average effective tariff rate (PETR) has been widening based on announced tariff rates. Several factors drive this gap between the PETR and the actual AETR, including shifting trade patterns, administrative issues, delayed payments and legacy exemptions.
  • We doubt that the actual AETR will converge to the higher PETR, due primarily to growing CUSMA compliance and shifting trade patterns. Our Canadian economic forecast reflects that skepticism. If the actual AETR were to converge to the PETR, our outlook for Canada’s economy and labour market would be much weaker.
  • Still, tariffs are unlikely to return to pre‑trade war levels given elevated tariffs on key Canadian exports such as autos, steel, aluminum and wood products. As such, trade barriers are likely to be a persistent obstacle to growth for the foreseeable future.

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Where Could Tariffs Go from Here? (PDF, 387 KB)
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