Canadian Firms Delay Passing Tariff Costs to Shoppers
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Many Canadian companies aren’t yet charging their customers higher prices because of tariffs, a sign that inflation pressure stemming from the ongoing trade dispute with the U.S. may be delayed.
Q3 data from Statistics Canada’ssaid 42% of businesses didn’t pass along tariff-relatedto their customers in the past six months.
A quarter of firms said they did charge more because of tariffs, and 33% of companies surveyed said they hadn’t experienced higher costs from the tariff war.
But about 40% of firms say it’s very likely or somewhat likely they’ll need toto cover tariff costs over the next year. The survey was taken from July 2 to Aug. 6.
Along with a stalling economy, the limited pass-through of tariffs to consumers is one reason Canadian inflation has remained subdued, even as US President Donald Trump’s trade war starts to drive up input costs.
(Bloomberg)
Last week, Prime Minister Mark Carney announced plans todropCanada’s retaliatory tariffs on many imports of US goods by Sept. 1, eliminating another potential source of price pressures. But the way the conflict will end up torquing prices remains a major question mark for policymakers at the Bank of Canada.
Though core inflation measures are above the bank’s 2% target, consumer prices have not yet risen the way some economists expected. But many companies do see input cost growth accelerating later this year, the survey showed.
“I think if you squint hard enough, you can see some signs of tariffs, but it’s not necessarily overt, it’s not necessarily that obvious,” Andrew Barclay, an economist with Statistics Canada, said in an interview. He says that while rising trade levies are hitting business-input costs, he agrees there’s not much evidence yet those firms are in turn passing that along.
“We don’t necessarily have the data yet. We don’t know as well if the wholesaler and the retailer will pass that price increase along to the consumer.”
The Bank of Canada’s latestcaptured similar results, with firms saying that competitive pressures and weak demand have kept them from raising prices.
Statcan’s survey also shows trade tensions are reshaping consumer behavior. Nearly one-fifth of businesses reported higher sales of Canadian products in the past six months, led by retailers, wholesalers and food services. About 21% of businesses changed their marketing to highlight Canadian-made goods, with retail trade leading at 45.5%.
Political dissatisfaction with the U.S. has fueled boycotts of American products, pushing many Canadians to domestic alternatives. Earlier this month, Canadian Tire saidsales at its flagship storesincreased as shoppers embraced Canadian products and brands.
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