With a fresh wave of U.S. tariffs on Canada set to take effect on Wednesday and no sign that President Donald Trump will delay them or call them off, border states including Minnesota, New York, Vermont, and Washington could soon face sharp economic pain.
On July 20, the Trump administration invoked section 338 of the Tariff Act of 1930 to order new 50 percent tariffs on about $20 billion worth of Canadian exports to the U.S., including hockey sticks, certain items of clothing, wines, some dairy products, and building materials such as cement and plywood. The new tariffs will not be imposed on energy, potash, fish, and critical minerals.
The move, the White House said, was in response to Canada’s “discriminatory treatment of American products,” including U.S. alcohol, dairy and automotive exports, introduced over the last year as the trade war with the United States escalated.
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Despite ongoing negotiations between Washington and Ottawa, Canadian broadcaster CBC reported that the two countries were at an impasse on Monday, with the tariffs likely to take effect on Wednesday as planned.
After talking to Trump on the phone on the same day, Canada’s Prime Minister Mark Carney described talks between the two governments as “delicate” and “intense,” suggesting that no clear progress had been made to stop the tariffs from coming into force.
Canadian leaders are not the only ones scrambling against time as the clock ticks on. Calls for the Trump administration to reach an agreement with the Canadian government and call the new tariffs off have come from the U.S. Chamber of Commerce as well, which has warned on Tuesday of “damage” to both economies as a result of the higher levies.
“As we approach this week’s deadline of potential new tariffs on Canadian goods, we encourage U.S. and Canadian officials to continue to engage in constructive dialogue designed to address areas of concern in the current trade relationship and to avoid the imposition of new tariffs,” U.S. Chamber of Commerce senior vice president for the Americas Neil Herrington said in a statement.
“The introduction of higher tariffs would damage both economies, drive up costs for U.S. families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on trade under the U.S.-Mexico-Canada Trade Agreement.”
Border States Likely To Feel Pain of Tariffs on Canada’s Goods
The tariffs, if implemented, are likely to hit communities at the border between the U.S. and Canada fastest, as research from Cornell University and Ohio State University has found that Washington’s trade wars hurt the states with the closest economic ties to the targeted countries harder than the rest of the country.
Northern border states such as Michigan and North Dakota are closely tied to Canadian markets, particularly when it comes to processed foods and livestock products, and are more vulnerable to tariffs imposed on Canada, researchers found. Southern states, including Texas and Arizona, are more vulnerable to tariffs imposed on Mexico, as they heavily depend on the country for stocking fruits and vegetables.
This means that states like Minnesota, New York, Vermont, and Washington, all of which have extensive trade relationships with Canada and substantial border-region economies, all stand to suffer first—and significantly more—from the expected new round of tariffs.
In a report issued in April, the New York State Comptroller’s office wrote that previously imposed tariffs have already hurt the state’s tourism from Canada and export to the neighboring country, with the impact of these disruptions being most acutely felt in regions near the Canadian border.
In these regions, travel from Canada had fallen by more than 21 percent until then, for a total of nearly 3.6 million fewer visitors, while exports to Canada had also declined by $3.8 billion due to tariffs.
Last week, New York-based public radio station WAMC reported that businesses in northern New York stand to suffer greatly from the new tariffs imposed on Canadian plywood, lumber, and other construction materials, as these would become dramatically more expensive with the new levies.
One building supplier that sources roughly a third of its inventory from Canada told WAMC that any tariff increase would likely be passed on to customers.
But the economic pain might later trickle down to the entire country, as importers could pass the new tariffs down to consumers.
In a recent report on the new prospective tariffs, the Chicago Fed noted that, as the tariffs cover 569 product categories and extend well beyond the sectors cited as the justification for the action and are stacked on top of existing duties and customs fees, import costs would rise immediately if companies continue sourcing from Canada, increasing the likelihood that at least some of those costs will be passed on to businesses and consumers.
For Americans already facing higher consumer prices, which have jumped 3.4 percent over the last year, up from 2.4 percent right before the Iran war, tariffs could bring an even heavier financial burden.
Newsweek reached out to the North Country Chamber of Commerce, Vermont Chamber of Commerce, Minnesota Chamber of Commerce, and the Border Policy Research Institute (BPRI) at Western Washington University for comment by email on Tuesday.
Can the New Tariffs Be Avoided?
On Monday, Canada-U.S. Trade Minister Dominic LeBlanc said that he and chief trade negotiator Janice Charette were “going to continue working” to find an agreement with Washington which could stop the new tariffs from coming into effect.
“Our job is not yet done,” LeBlanc said, as reported by CP24.
But it is unclear whether the two countries can find a compromise that would avoid the new tariffs.
The U.S. has reportedly been asking for Canada to remove its remaining retaliatory tariffs on American autos, to adjust its dairy quotas, and remove the ban on U.S. alcohol sales imposed early last year in response to the Trump administration’s own tariffs against Canada.
This latter concession is out of the control of Prime Minister Mark Carney, as Canadian provinces are in control of the alcohol in their respective jurisdictions.
On the other hand, Canada would like the U.S. to drop or reduce tariffs on its steel, aluminum, automobile and lumber sectors.
For both countries, however, it is going to be tricky to make concessions to the other. That is especially true for Canada, where a new poll from the nonprofit Angus Reid Institute found that 79 percent of Canadians have an unfavorable view of Trump and 59 percent oppose the new round of tariffs.
Contact Newsweek editors on this story: Ben Kelly and James Debens