The price of a trade war? Gen Z might be paying for decades

These extreme measures have rattled Canada’s economy, with so much uncertainty about the future, it’s lead to job losses in the auto industry and a downturn in the housing market. In response, Canada implemented retaliatory tariffs and is working on building better trade relationships with other countries to lessen our reliance on the U.S. with Prime Minister Mark Carney stating that the Canada-US trade relationship, as we knew it, “is over.”

But what are tariffs, exactly? 

Think of tariffs like a cover charge at an event. Countries basically charge an entry fee for stuff coming in from other countries. So, if the U.S. imports cars from Canada, and a tariff is in place, the U.S. charges an additional fee at the border before letting the goods in. That increase in cost is often passed along to consumers.

Tariffs are meant to “protect domestic businesses”—in other words, governments want you to buy goods made in your country, but when governments hike tariffs, like Trump’s recently done, the cost of goods must go up too in order to protect profit margins, making foreign products more expensive. It’s the people buying the products that pay the tariffs, and those suppliers feel the impact of lack of competitive pricing.  

Obviously some things are just nice to have, but the real trouble arises when tariffs are hiked on everyday necessities, like cars, food and materials like aluminum and metal (think cars, laptops, phones, construction, tools and medical gear). That’s when trade wars start, and the consequences are felt both immediately and for years to come. The kind of stuff future generations will learn about in history class.

Speaking of history, when was the last time something like this happened between the U.S. and Canada? Donald Drummond, former chief economist at TD Bank and Fellow and adjunct professor at the School of Policy Studies at Queen’s University and Fellow-in-Residence CD Howe Institute takes us back nearly a century to the Smoot-Hawley Tariff Act of the 1930s, where a U.S. law jacked up tariffs on over 20,000 goods.

“They were higher and much more pervasive than steel and aluminum,” he says. “And prior to that was the 1890s. This is the third time in Canada-U.S. history over the last 130 years. Both the 1890s and 1930s ended very badly, not just for the world and Canada, but ended very badly for the United States.” 

“They didn’t succeed in their objectives, and ended up removing tariffs, in both cases,” Drummond explains. “Particularly in the United States case in the 1930s—really dramatically—just totally changing their policy thrust after a while.” The 1930s mirrored recent events where the U.S. imposed higher tariffs, leading other countries to retaliate. In economic literature, it’s what’s known as the cobweb diagram, illustrating each round of retaliation: the U.S. raises tariffs, others respond, and the cycle continues.

Basically, global trade collapsed, the Great Depression worsened and the policy backfired—hard. What’s happening now, Drummond says, “seems very, very familiar.”

So, what do Trump’s tariffs mean for young Canadians?

It’s hard to predict the future any time, let alone with what’s happening in the U.S. right now. But Drummond says that, for the moment, “and, I emphasize at the moment, because Trump does and can change his mind at any single moment,” he says. The current tariffs primarily affect industries like vehicles, aluminum and steel.

Drummond says Canadian consumers are likely to be hit hardest by rising car prices and repair bills, as most of the vehicles we drive—and the parts needed to fix them—come from the U.S.

Even cars made in Canada rely on certain American parts, so no consumer is really off the hook, with extra costs per vehicle estimated between $4,000 and $12,000. Tariffs won’t likely make any car model cheaper. 

But there are plenty of other indirect ways that tariffs are making life less affordable for Gen Z. Let’s start with food. 

The 2025 Canadian Food Price Report forecasts an overall food price increase of 3% to 5% this year, translating to about an additional $800 in annual grocery expenses for the average family of four. ​

These increases are partly due to Canada’s retaliatory 25% tariffs on some U.S. food products, like fresh produce and prepared foods. Take American-made Tropicana orange juice for example, now priced higher than Canadian OJ brands, with some stores selling it for as much as $13.99 compared to the $5 to $7 we’re used to.

But it’s not just food that’s getting more expensive—tariffs are quietly driving up the cost of all kinds of everyday essentials. From phones and laptops to appliances, car repairs, and even the cost of building or renovating a home, Canadians are starting to feel the pinch on all kinds of day-to-day necessities.

How will tariffs affect the job sectors, security and earning power for Gen Z?

It depends on where you work and your career. Drummond warns that while tech and telecom haven’t been directly targeted by tariffs—yet—they certainly could be eventually. He says if Canada moves forward with a digital services tax, Trump could again retaliate, putting pressure on a major source of youth employment. 

Young Canadians, he adds, might not be able to pursue the careers they trained for if the sectors tied to U.S. exports—like manufacturing or certain high-tech fields—get hit. In that case, many may be forced to pivot toward industries focused on Canadian or alternative export markets, like Europe, though that kind of shift won’t happen overnight. 

Drummond also points out that, while freelancers and gig workers may not be directly tied to large exporters, small businesses relying on trade south of the border could still feel some ripple effects.

One of the most serious and lasting consequences of this tariff dispute—should it tip us into a recession, which Drummond warns is increasingly likely—could be felt most deeply by young Canadians entering the workforce. He points out that graduating during a downturn often means struggling to find work in your chosen field. Many recent grads settle for roles they weren’t trained for, and most never find their way back to their original path—which may ultimately mean earning less over their lifetime. 

That warning is backed by a study from RBC, which found that grads from the Great Recession (2007-2009) saw slower wage growth, were less likely to land management roles, and were less likely to be in skilled positions by their early 30s compared to those who graduated before the downturn. 

With more than 1.5 million students currently enrolled in Canadian universities, and 32% of Canadian firms surveyed by the Bank of Canada expecting a recession, the timing couldn’t be more crucial.

How can young Canadians prepare for the unpredictability of tariffs?

“It’s bigger than the financial crisis in 2008.” Drummond doesn’t mince words about the severity of the current trade dispute.

While that may sound alarming, he encourages young Canadians to shift their mindsets and recognize that the world is far bigger than just Canada and the United States. With trade relationships with the U.S. looking increasingly unstable, young people should start setting their sights globally—whether that’s in terms of career paths, education and/or future business opportunities. He says, there are over 200 countries, and many of them represent exciting untapped opportunities. 

On the financial front, rethink how you use the traditional investment playbook, he says. That means diversifying beyond U.S. markets, looking toward stable sectors, like utilities, and preparing for a very different economic landscape. 

But it’s not all bad, though. One possible silver lining? A weaker economy could cool Canada’s overheated housing market, making homeownership slightly more attainable for young Canadians.

Read more about economy news:

• Will Canada’s economy grow in 2025?
• How to deal with your finances when the economy is stressing you out
• Why are Canadians still frustrated with the economy?
• What does Trump’s election mean for the Canadian economy?

About Erin Pepler

Erin Pepler is a freelance writer based in the Toronto area. A frequent contributor to MoneySense, she is also the author of Send Me Into The Woods Alone: Essays on Motherhood.