ANALYSIS: Potential impact of tariffs on municipalities

Municipalities throughout Alberta are likely to be affected by tariffs imposed by both Canada and the United States (U.S.).

This issue is rapidly evolving. In addition to our own monitoring and analysis, Alberta Municipalities (ABmunis) is engaged with the Government of Alberta and the Federation of Canadian Municipalities (FCM) to align and amplify messaging where possible. 

We will explore the ways in which the new U.S. administration's actions will affect municipalities in the weeks and months ahead and at our Spring Municipal Leaders’ Caucus (MLC) on March 6 in Edmonton.

As your municipality is considering the impacts of tariffs on your community, some of the potential impacts could include:

• Reduced funding from the Government of Alberta – Particularly because less taxable revenue will be generated from natural resource exports, which is what drives the provincial government’s surplus or deficit budget position. Funding provided to municipalities via the Local Government Fiscal Framework (LGFF) is directly tied to the provincial government’s revenues. Therefore, reductions in provincial revenue will result in less funding to municipalities.
• Reduced municipal revenues – For example, higher unemployment will affect residents’ ability to access pay-for-use municipal services (e.g., transportation, recreation facilities).
• Reduced Investment – Tariffs may cause businesses to slow or shutdown their operations (e.g., farming, agriculture, energy), along with limiting new economic development in municipalities.
• Stunted property tax growth – Higher unemployment rates and increasing costs of living may increase pressure from residents to maintain lower property tax rates.
• Higher costs on goods & services – In addition to tariffs imposed on imported U.S. goods, alternatives (including those produced in Canada) may be more expensive, resulting in municipalities having higher-than-planned costs for goods and services. There will also be instances where Canadian-made products become cheaper due to reduced demand (i.e., countervailing forces). 
• Supply chain disruptions & delays – Demand is likely to be affected for both international and domestic producers, causing issues for the availability and accessibility of goods and services.
• Increased demand for social supports – Recessionary economic factors may create (and exacerbate) issues pertaining to homeless, ‘in-need’, and new / temporary Canadian populations (e.g., access to medical services, policing services).

Check future issues of The Weekly e-newsletter for more information on tariffs and the impact they could have on Alberta communities.