The US-Canada trade war: What happened and what’s next?
The United States and Canada, for generations among the world’s closest allies, have slid into a full-blown trade war in recent days as long-running negotiations stalled.
Although the nations’ cratering trade talks seemed sudden, the neighboring countries have been at loggerheads for much of President Donald Trump’s second term, as he has played economic hardball on trade. Trump had already imposed U.S. tariffs on Canadian automobiles, aluminum and steel. In July, he threatened to impose new tariffs on Canada because its wildfires were sending smoke into the U.S. And in July, he said a new round of 50% tariffs on hundreds of goods would take effect in 30 days. That pushed negotiations into high gear.
In recent days, both sides blamed the other for making last-minute demands. The Trump administration rejected Canada’s insistence on lower tariffs on heavy trucks, promoting Canadian and French-language content in streaming services, subsidies for publishing and films, and French-language labeling of products sent to Canada.
U.S. Trade Representative Jamieson Greer told CNBC on Aug. 24, “We offered them the best access to the United States of any country in the world. … It certainly doesn’t make economic sense… but they came in and they wanted more, and we weren’t prepared to do that.”
The same day, Trump wrote on Truth Social, “Canada has been ripping off the United States of America for years. Their ridiculously high tariffs on our Farmers and farm products has made life impossible for these great American Patriots, and has long created a 60 Billion Dollar Deficit between our two Countries. Not sustainable, and NOT ANYMORE!”
What products are affected?
The goods subject to the newly imposed tariffs are a modest subset of cross-border trade, representing about $20 billion of the $382 billion in Canadian goods bound for the U.S.
Still, about 500 products are affected, including alcoholic beverages, dairy products and flowers. Although some U.S. tariff targets are symbolic — such as hockey equipment — others could have a significant economic impact in the U.S., such as plywood, a key component of housing construction.
“The U.S. does not have enough plywood to meet construction demand, so it will have to continue to source plywood from Canada,” said Ross Burkhart, a Boise State University political scientist who specializes in trade policy. “This will make construction costs more expensive, and in combination with the higher cost of mortgages, this tariff can potentially have a major impact on housing affordability.”
Collapsed trade talks also mean existing U.S. tariffs on Canadian automobiles, aluminum and steel will remain in place.
Canada is teeing up retaliatory tariffs on U.S. goods, effective Sept. 8. Prime Minister Mark Carney has said the moves will likely affect “steel, dairy, appliances, agricultural equipment, pulp and paper, electronics.”
The tariffs could be challenged in U.S. court. The Trump administration imposed them under Section 338 of the Tariff Act of 1930, an authority that has not been used before, and some legal experts told PolitiFact they think it could be overturned in court. Already, the Supreme Court threw out an earlier round of Trump tariffs based on a different law.
Could these new tariffs impact the midterm elections?
Of the eight most competitive U.S. Senate races, six are in states where Canada is the top trading partner: Georgia, Iowa, Maine, Michigan, North Carolina and Ohio.
If there’s any economic fallout in these states — particularly for small businesses, which are less able to adapt than big companies — campaigning Democratic candidates are likely to cast blame on the Republican president.