Canada–U.S. Trade War & Tariffs

 Escalation of Tariffs:

• In January 2025, President Donald Trump imposed 25% tariffs on all Canadian goods
  
  
• This prompted Canada to announce dollar-for-dollar counter-tariffs on about $30 billion of US goods. ​We began with targeting goods either exclusively or primarily produced and shipped from "red (Republican-run) states", including dairy products, orange juice, most fruit, coffee and alcohol¹.
  
  
• This back and forth continues to ebb and flow – as of now we have 25% retaliatory tariffs on all goods that are not CUSMA (USMCA) compliant, including vehicles imported from the US that aren’t under CUSMA. 
  
  
  
  
  
  
• Almost immediately following the announcement of the US tariffs, Canadian media embarked on a consistent fact-checking campaign. This was aimed at all politicians, but corrections were primarily levied against Donald Trump and Pierre Poilievre (the Canadian Conservative leader) due to consistent misinformation and disinformation in their press conferences.
  
  
• Examples:

"We subsidize a lot of countries and keep them going and keep them in business," Trump said. "In the case of Mexico, it's $300 billion. In the case of Canada, it's close to $200 billion a year." 

• According to the Office of the United States Trade Representative, The U.S. goods trade deficit with Canada was $63.3 billion in 2024, down from $64 billion in 2023² 

• According to US census data, in February 2025 Canada was eighth on the list of countries with the highest trade deficits with the US, below China, Switzerland, Mexico, Ireland, Vietnam, Taiwan and Germany³. 

• This is largely due to the population disparity between the US and Canada – the US has 8.3x more people than Canada does, and to expect dollar-for-dollar trade rates with the US is irresponsible. 

• Trump also claimed Canada imposes a "250 to 300 per cent tariff on many of our dairy products. They do the first can of milk, the first carton of milk at a very low price but after that it gets bad." 

• Those high tariffs on U.S. dairy only apply if exports exceed set quotas. Below the quotas, the U.S. dairy products enter tariff-free because of the Canada-United States-Mexico Agreement (CUSMA), according to the U.S. Department of Agriculture.  

• According to the International Dairy Foods Association, the U.S. has never come close to exceeding its quotas.² 

• There is question as to how legal the tariffs placed on Canada are, especially on the goods and services which were previously covered by free trade agreements. As a result this situation is frequently referred to as an “economic war”, and the Canadian governments are structuring themselves as if a war-like conflict against our country was in place.

Provincial Responses:

• Several Canadian provinces and territories have removed U.S. alcohol from their liquor stores in response to American tariffs. Most, if not all, provinces have also agreed to work with each other and with the Federal government to reduce or eliminate interprovincial trade barriers which would facilitate the flow of goods and services
  
  
• Ontario banned $30 billion worth of procurement contracts to the US and ripped up a $100-million Starlink deal in the wake of both the tariffs and backlash from Elon Musk’s Nazi salute. Initially, Ontario had levied a 25% surcharge on its electricity exports, affecting approximately 1.5 million homes in Minnesota, Michigan and New York⁴, but this was walked back when Trump paused tariffs initially. Ford has said this surcharge, as well as cutting off supply entirely, is still on the table should tariffs be increased.
  
  
• Similarly, Quebec has threatened to cut off their electricity exports to the US as a result of increased tariffs. The province is currently party to 2 multibillion-dollar power contracts with Massachusetts and New York for transmission projects slated to come online over the next 15 months⁵
  
  
• Nova Scotia has begun cancelling existing procurement and service contracts with American companies and doubled the tolls for American commercial vehicles travelling the Cobequid Pass (a northern highway that connects the province with New Brunswick)⁶

Economic Repercussions:

• The trade tensions have strained Canada's economy, with industries like agriculture and manufacturing facing challenges due to reduced access to the U.S. market.
  
  
• The United Steelworkers Union argues that tariffs on Canada are damaging to both economies. Canada and the U.S. trade $1.3 trillion annually, and disrupting this hurts workers and economies on both sides
  
  
• Due to the sudden uncertainty around trade relations, businesses on both sides of the border could delay investments, further slowing GDP growth⁷.
  
  
• A good portion of Canadian exports that are critical to both the US and Canadian economies are minerals, particularly critical minerals and metals such as uranium (for power plants and military use), cesium (used for atomic clocks and radiation therapy for cancer), phosphorous and potash (both used in fertilizer, among other things). Slowing or completely barring trade to the US for these items will impact Canada harshly in the short run. Although we have buyers willing to step up, it takes time and resources to reroute trade.
  
  
  
  
  
• BDC Capital (the Business Development Bank of Canada) estimates that if tariffs remain at current levels the Canadian GDP could shrink by 1% over the course of 2025. This is driven by the decline of the US economy, less consumer and business spending and less investment by corporations in the Canadian economy⁸.
  
  

• The issue Canadians face is that so much of our economy is tied to the US whether directly or indirectly, and when we have infighting (such as the cons wanting to keep / raise tariffs to fund their plans as opposed to trying to resolve the trade war) separating more fully from the US is impossible⁹.
  
  

• Our dollar normally goes up when the US falls, however because the US is affecting the entire world we are experiencing similar albeit less of a drop.
  
  

• As of today, the economic forecast does not point to a true recession in Canada, but the Canadian economy will undoubtedly slow as trade barriers remain uncertain¹⁰.
  
  

• This is subject to change based on the actions of the new Liberal government following Canada's federal election on April 28. 

Impact on Canadian Consumers:

• Tariffs have led to higher prices for everyday goods, including food and household items, affecting Canadian households. ​Some industries, such as steel, aluminum, packaging and automotive, are facing major layoffs without government assistance.
  
  

• Aside from goods listed under CUSMA (USMCA), these industries face heavily tariffed products. This prompted Flavio Volpe, head of Canada's auto-parts lobby, to write:

“The. Auto. Tariff. Package. Will. Shut. Down. The. Auto. Sector. In. The. USA. And. In. Canada. Don't be distracted. 25% tariffs are 4 times the 6/7% profit margins of all the companies. Math, not art."¹¹

• When it comes to energy, approximately 77% of Canadians polled supported levying higher tariffs on the US when it comes to potash, critical minerals, oil, gas and electricity¹².
  
  
• A large grassroots movement to “buy Canadian”, including educational social media posts and news bites on the difference between “Made in Canada” and “Product of Canada” began to build steam, and a nation-wide boycott of as many American goods and services as possible effectively spread to other countries such as the UK, Denmark and Sweden. This boycott has been publicly supported by political leaders Justin Trudeau and Jagmeet Singh as well as by many Americans seeking to buy Canadian in solidarity¹³.
  
  
• In February, polling showed 91% of Canadians want Canada to rely less on the US as opposed to trying to repair the relationship with the US¹⁴. Approximately 56% of those polled were either planning to cancel their leisure trips to the US or had done so already – a move done out of both support for Canadian tourism as well as concern for their safety in the US given escalating xenophobia and border inspections¹⁵.
  
  

• This trade war has also highlighted the importance of national unity to Canadians. Quebec, traditionally a province with deep separatist roots that sees themselves as fundamentally different from the rest of Canada, was one of the first to step up in solidarity and encouraged a “Canada First” system of leadership moving forward in the face of economic warfare with America¹⁶.

  • The Albertan government has been incredibly resistant to the notion of Canada First leadership, largely due to their reliance on oil and gas exports to the US for refining. While the US imposed 10% on O&G imports from Canada, AB leader Danielle Smith continues to fight against retaliatory tariffs and took several trips to the US (including visits to Mar-a-Lago and an event with Ben Shapiro) in an attempt to have them removed from just her province¹⁷.
    

Sources

1https://www.canada.ca/en/department-finance/news/2025/03/canada-announces-robust-tariff-package-in-response-to-unjustified-us-tariffs.html

2https://www.cbc.ca/news/politics/fact-checking-donald-trump-s-claims-about-canada-in-his-global-tariff-speech-1.7500989

3https://www.census.gov/foreign-trade/statistics/highlights/topcm.html

4https://www.cbc.ca/news/canada/toronto/ontario-electricity-surcharge-us-tariffs-ford-1.7476515

5https://www.theglobeandmail.com/business/article-quebec-considering-stopping-us-electricity-exports-to-northeast-spot/

6https://chatnewstoday.ca/2025/03/04/provinces-tariff-tuesday-reaction/

7https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/canadas-response-us-tariffs.html

8https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/publications/monthly-economic-letter/2503

9https://www.cbc.ca/news/world/tariffs-global-economy-1.7515591

10https://thoughtleadership.rbc.com/preparing-for-the-downside-could-federal-finances-withstand-a-trade-war/

11https://www.cbc.ca/news/world/trump-liberation-day-analysis-1.7500598

12https://www.ctvnews.ca/federal-election-2025/article/three-quarters-of-canadians-favour-using-tariffs-on-energy-and-critical-minerals-in-trade-war-with-us-survey/

13https://www.cbc.ca/news/politics/trump-tariffs-canada-february-1-1.7447829

14https://www.bbc.com/news/articles/c0qw9y94w2vo

15https://abacusdata.ca/canadians-plan-to-avoid-the-u-s-amid-political-tensions/

16https://youtu.be/8qBU2P0yomI?si=VZJ_GF6mzWCPWU4P

17https://www.ctvnews.ca/business/article/alberta-pauses-some-of-its-fight-back-plan-against-the-us-amid-tariff-dispute/