The dog days of summer don’t mean the US and Canada are easing up their trade war.
After talks between the sides fell apart, more tariffs were enacted or threatened over the weekend and on Monday. BI’s Kelsey Vlamis and Truman Dickerson have a list of some of the more popular products that have recently been hit with 50% tariffs. (Apologies, hockey players.)
The latest tariffs affect about 5% of all Canadian exports to the US, totaling about $20 billion. That’s not enough to immediately plunge the US economy into chaos, but it will deeply impact the industries the new levies target.
Meanwhile, Canadians don’t seem to mind the rivalry heating up again. BI’s Henry Chandonnet spoke to Canadians willing to double down on their American boycott.
This also goes beyond your next Crown Royal bottle being a bit more expensive. BI’s Juliana Kaplan, Madison Hoff, and Allie Kelly have more on what the reignited trade war means for both economies.
Ultimately, if businesses pass those costs on to consumers via higher prices — and why should we expect anything else? — that’s another source of inflationary pressure. That further complicates the Fed’s decision on rate cuts.
The biggest risk from this trade war isn’t what’s already arrived but what could come next.
After Canadian Prime Minister Mark Carney announced retaliatory tariffs coming next month, Trump responded with an even bigger blow.
The president threatened to double the headline tariff on Canadian automobiles and parts to 50% starting in January 2027.
Trump’s intentions behind the tariffs appeared clear in a Truth Social post announcing the plans.
“Build in the U.S. and there are ZERO TARIFFS,” Trump wrote.
That would require US auto companies to completely rethink their supply chains. Automobile parts often cross US, Mexican, and Canadian borders multiple times before the finished vehicle lands at a dealership.
And cars aren’t the only reminder of how intertwined the two countries are. Carney took a jab at the US on Monday while announcing a new Canadian icebreaker deal, calling the ships one of the “many, many, many things” America needs from its northern neighbor.
Of course, this is tariffs and Trump we’re talking about. Whenever that’s the case, you have to bring up the TACO phenomenon — Trump Always Chickens Out. A January deadline gives both sides plenty of time to iron out a new deal.
There’s also another interesting wrinkle between now and the new year: midterms.
If Republicans struggle at the polls, Canada could view that as a broader sign Trump’s economic agenda is losing support. But if the GOP does well, Trump could use it as validation of his approach to trade.
