Last night, United States President Donald Trump did what we feared he might do: he signed an executive order putting into place 35% tariffs on Canadian goods not included in CUSMA. As we went through the days leading up to this trade negotiation deadline, we both advocated that the only proper end to these negotiations was a complete avoidance of any tariffs whatsoever, and the elimination of any threats of future tariffs. That remains the only way to get both economies back on track, but what is happening is quite the opposite. These new tariffs are going to further devastate two economies that are both dealing with an affordability and housing crisis, while the United States imposes what is actually a tax on their own people while calling it a power move against Canada. The reality is that tariffs are always a tax on consumers, and one that is going to mean life gets much worse very quickly for Americans and Canadians alike.
Canadian Minister Dominic LeBlanc, responsible for Canada-U.S. Trade, Intergovernmental Affairs and One Canadian Economy, was tasked with making the negotiations work for Canada, and that was unfortunately a failure. Those attending the negotiations seem to indicate an actual negotiation was low priority for the Americans, so there seems to have been little chance of avoiding this.
Exports to the U.S. make up around 75% of Canada’s total exports. The 35% U.S. tariff on Canadian goods could shrink Canadian GDP by 1.5–2.5% within a year. That means goods are going to cost much more for Canadians, and their buying power is going to take a hit. Furthermore, Canadians are going to have to deal with potentially losing hundreds of thousands of jobs from at-risk industries especially in Alberta, Ontario, and Quebec.
As much as the United States likes to claim that they don’t really need Canada, the truth is that Canada is the largest U.S. export market for U.S. goods, accounting for around 15–18% of total U.S. exports. Although the U.S. economy is more diversified and may not feel the economic impact as significantly as Canada, tariffs are a tax on consumers that will drive up everyday costs of goods and limit product availability.
Border states like Michigan, Ohio, New York, and Minnesota, where cross-border trade is key for these local economies, will be hit the hardest. These tariffs have the potential to eliminate hundreds of thousands of jobs for American workers, a number that will increase if Canada retaliates. These losses will likely hit key industries like manufacturing and agriculture; sectors already grappling with inflation and supply chain complications.
Business groups and small business owners alike are sounding the alarm that tariffs on Canadian goods will raise costs, stifle innovation, as well as hit consumers’ wallets. With the 2026 midterms on the horizon, the political blowback from higher prices and lost jobs could be quite damaging for Trump and other tariff-happy policymakers.
There are simply no advantages to tariffs, and Canada would be making a big mistake if it retaliates with reciprocity, since that will only mean an increase in prices for Canadian consumers virtually everywhere they shop. Prime Minister Mark Carney’s initial reaction to this new tariff rate is to express his disappointment in the decision. He says that while thankfully CUSMA goods are not affected, Canadian industries like lumber, steel, aluminum, and automobiles will be hurt. The government is planning to mitigate that hurt probably through government programs, spending taxpayer money to help with the financial hit. He is also mentioning his focus on growing interprovincial trade and buying Canadian, which if taken too far will only continue to hurt the economy by becoming more isolationist. Thankfully, he also talks in his statement about continuing work to diversify Canada’s trade partners, since the United States can no longer be relied upon to be Canada’s reliable trading partner.
Losing one of your most trustworthy and useful trading partners is not the best thing for the United States, but since it is happening anyway, it is important that rather than retaliate with more tariffs on the United States, Canada instead focuses on interprovincial trade and diversifying and expanding free trade with as many foreign countries as possible. Outside of eliminating all tariffs and threats of tariffs, this is the only real bet to get the Canadian economy back on track.
This is an ever-emerging issue, and we will be sure to update this blog with our analysis of the latest developments. The Consumer Choice Center can only hope that things get better for consumers, because as things stand, life is getting much harder with no end in sight.
