Canadians expecting tariffs imposed by United States President Donald Trump to evaporate once he leaves office should think again, says Capital Economics Ltd.

“The precarious fiscal situation means the next administration will be in no rush to remove the tariffs that are in place at the end of President Trump’s term,” Stephen Brown, the firm’s chief North America economist, said in a new report on Oct. 5.

He said the U.S. needs money and tariffs are providing it, with gross revenue accounting for roughly one per cent of gross domestic product (GDP) based on an average tariff rate of 11 per cent.

The U.S. federal budget deficit is estimated to hit six per cent of GDP, or nearly US$2 trillion, in this fiscal year. The U.S. total federal debt is US$40.2 trillion, according to the U.S. Treasury Department .

Given the poor financial landscape, which has bond markets on the attack with higher yields, Brown said it’s possible the best that can be hoped for is that whoever inhabits the White House won’t introduce any new tariffs on U.S. allies.

There are lawsuits underway in the U.S. against the latest tariffs, but they are based on whether the administration took the required steps to impose the levies, not whether Trump overstepped the bounds of his power, as was the case when the U.S. Supreme Court earlier this year struck down the so-called Liberation Day retaliatory tariffs imposed under the International Emergency Economic Powers Act.

“Even if the courts declare some current tariffs void, the administration would likely impose new ones in a different form,” Brown said. “ The next administration can take a passive approach to any Section 232 and 338 tariffs still in place, as these have no fixed expiry.”

Last year, Trump imposed tariffs on imported steel and aluminum under Section 232 of the Trade Expansion Act that covered national security concerns relating to products and sectors. Those tariffs rose to 50 per cent later in the year.

He also imposed a 25 per cent levy on foreign cars and trucks in 2025, but gave Canada and the U.S. a partial break on car parts made in the U.S. If half a car is assembled in the stateside, it would have an effective tariff rate of 12.5 per cent.

Trump in late August implemented Section 338 tariffs related to unfair trade practices, targeting roughly $28-billion worth of Canadian goods, with new levies of up to 50 per cent on auto, dairy, alcohol and many other items such as plastics, furniture and electronics that were previously exempt under the Canada-U.S.-Mexico Agreement.

“The current tariff regime, if it is upheld by the courts, will be easy to retain,” Brown said.

Section 301 tariffs, which cover the unfair trade practices and policies of countries, are also in place and last for four years, though the bar to extend them is low.

“Whether tariffs remain in place will therefore depend on political and fiscal considerations,” he said.

Democratic progressives appear the most likely to drop tariffs to improve affordability, but even they might struggle to do so if the U.S.’s fiscal troubles boil over.

“At the extreme, Congress may be forced to pass tariffs into law to guarantee the revenue and get the market on side,” he said, adding it’s possible a new administration could drop “some” of the 50 per cent tariffs imposed on Canada.

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A majority of Canadians expect inflation to increase over the next 12 months, a potentially worrying sign for the Bank of Canada as it weighs interest-rate hikes.

A Nanos Research Group poll for Bloomberg News shows 54 per cent of Canadians think the yearly change in the consumer price index will be higher than the current three per cent by this time next year. — Bloomberg

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Dan ran his own flooring business for just over a decade until injuries and tariff uncertainty forced him to close shop this spring. At the time, he owed about $38,000 on a business line of credit and a credit card, plus roughly $6,000 in GST/HST. He thought the debts would end with the business, but the bank keeps calling. He asks FP Answers if he is still personally on the hook for what is owed. Find out more

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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