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Escalating trade disputes between President Donald Trump and Canada are squeezing the economy north of the border, threatening jobs and deepening families’ financial woes as high U.S. tariffs on about $20 billion in goods remain in place.
U.S. tariffs have hit the country’s steel, aluminum, lumber and auto producers, who rely heavily on the U.S. market. Steel exports have fallen by about half since the tariffs took effect, while lumber exports were about 20% below 2024 levels earlier this year, according to the Bank of Canada. Production and jobs also declined in some of the hardest-hit industries.
Canadian families are also feeling the pressure. Consumer prices were 3% higher in August than a year earlier, with food prices rising 2.8% and transport costs rising 7.5%, according to the government’s own data.
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The trade fight intensified under Trump and Canadian Prime Minister Mark Carney, with negotiations breaking down and both countries imposing new measures targeting each other’s products. (Anna Moneymaker/Getty Images)
Retaliatory tariffs on American products have also increased these costs.
Prices of affected goods, which include groceries, household products, furniture, electronics and appliances, rose about 6% more than comparable products that were not affected by the tariffs, according to the country’s central bank.
But even as Canada feels the economic pain, the disputes motivating Trump’s trade fight are not new.
“The Trump administration has been complaining about access to dairy, and generally speaking, those complaints are completely valid,” David Clement, head of North American affairs at the Consumer Choice Center, told Fox News Digital.
“Canada applies exorbitant tariffs on imports from the United States and around the world when it comes to chicken, turkey, eggs, cheese and milk,” said Mr. Clement.
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Clement noted, however, that differences between U.S. and European access to the Canadian market reflect terms negotiated under separate trade deals, including the USMCA reached during Trump’s first term.
But dairy products represent only a fraction of the broader U.S.-Canada trade relationship.
Softwood lumber has long been a source of trade friction between the United States and Canada, with the two countries clashing over Canadian lumber exports for decades. (Joshua Lott/Bloomberg/Getty Images)
Scott Lincicome, vice president for general economics at the Cato Institute and the Herbert A. Stiefel Center for Trade Policy Studies, said more than 99% of trade between the United States and Canada was exempt from tariffs before 2025, with negotiators historically willing to tolerate disputes over politically sensitive products like dairy in order to preserve the broader relationship.
“The Trump administration has so far refused to make this deal,” he said.
Lincicome said free trade in products such as fertilizer, energy and lumber helps keep costs low for American farmers, homebuilders and consumers.
With the midterm elections looming in just weeks and the cost of living in focus, the trade conflict is growing as rising energy prices add additional pressure on consumers.
Canadian Prime Minister Mark Carney faces a deepening trade dispute with the United States as Trump steps up tariff pressure. (David Kawai/Bloomberg via Getty Images)
Lincicome called the combination a “double whammy.”
“First there were the customs duties which increased the prices of many products. And then there was the surge in energy prices because of the war in Iran,” he explained.
Rising diesel prices can impact the economy as it fuels tractors, trucks and trains, Lincicome said, acting “as a kind of additional tariff” by increasing the cost of getting products to consumers.
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Despite the escalating tensions, Clement warned against letting the dispute damage the wider relationship.
“The partnership between Canada and the United States is one of the most important trading relationships the world has ever known,” he said. “It should be passed. It should be improved, and it should not be torn down by either side.”
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