What the U.S. and Canada’s Trade War Could Mean for Prices
· Time
A slew of goods moving between the U.S. and Canada are being hit by sweeping tariffs as the trade war between the allied nations intensifies, threatening to raise prices for consumers on both sides of the border.
Retaliatory Canadian tariffs on about $20 billion worth of American products, which Prime Minister Mark Carney said his government would enact after trade talks between the two countries broke down last month, went into effect on Tuesday.
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The new tariffs are intended to match “dollar for dollar, rate for rate” the ones that U.S. President Donald Trump’s Administration has levied on Canadian imports. The U.S. imposed 50% tariffs on roughly $20 billion worth of Canadian goods that went into effect the day after negotiations collapsed in August.
The trade war is set to further escalate later this month: the Trump Administration said on Tuesday that it will bar the import of certain dairy products, motorcycles, and alcoholic drinks from Canada, starting on Sept. 29. The announcement comes after several Canadian provinces prohibited American alcoholic beverages from being sold last year.
There is no clear resolution to the conflict on the horizon, and both Trump and Carney are standing their ground.
Here’s how the tariffs—on both sides—could affect consumers amid the ongoing rift.
What products will be impacted by the U.S. and Canadian tariffs?
The Trump Administration has levied tariffs on a wide range of Canadian products imported into the U.S., including from the dairy and alcohol industries. In response, Canada fired back with counter tariffs impacting products such as dairy and steel.
Experts point out, though, that the goods being affected by the tit-for-tat tariffs make up a small portion of the overall trade between the two countries. The U.S. tariffs, for instance, are impacting about 5% of the nearly $382 billion worth of goods that Canada exported to the U.S. last year, while the Canada tariffs are affecting about 6% of the more than $330 billion worth of goods that the U.S. exported to its northern neighbor in 2025.
“The current amount of trade isn’t all that large,” says Kimberly Clausing, the Eric M. Zolt Chair in Tax Law and Policy at the University of California, Los Angeles School of Law and former lead economist in the Biden Administration’s Office of Tax Policy. “The impact will be significant, certainly to those who are trying to sell products, but it won’t be as enormous as if this gets more out of hand.”
How will the tariffs impact American and Canadian consumers?
Tariffs are a tax on imported goods that is paid for by the importer. But that cost can ultimately get passed on to the consumer through higher prices. For instance, if the U.S. levies tariffs on milk imported from Canada, then American consumers could see the price of Canadian milk go up on grocery store shelves—and vice versa for Canada’s tariffs on milk imported from the U.S.
“We’re actually kind of taxing ourselves when we put on the tariffs, and the Canadians are taxing themselves in response,” Clausing says. “So it’s the actions of the Trump Administration that are raising costs for U.S. consumers. The actions of the Carney administration are not; they’re hurting Canadian consumers.”
Despite that, there is strong support among Canadians for the retaliatory tariffs levied on U.S. goods. A recent Ipsos poll conducted for Global News found that more than 70% of Canadians said they backed the Carney government’s move to enact counter tariffs on U.S. imports, and more than 60% said they agreed with the decision to walk away from the negotiation table “even if it meant higher costs and job losses.”
By contrast, a majority of Americans—nearly 60%—said they opposed the U.S. implementing additional tariffs on Canada, according to the findings of an Ipsos poll.
Peter Morrow, a professor in the economics department at the University of Toronto, says one explanation for the support amongst Canadians for the tariffs could be that politicians often portray the levy as a “signal of strength,” rather than focusing on the economic impact that tariffs can have on consumers. A poll by the Canadian nonprofit Angus Reid Institute found that nearly 70% of Canadians felt that Carney showed “strength” by rejecting a “bad” trade deal with the U.S.
“My concern,” Morrow says, “is that people will go down this path of what they perceive as demonstrating strength, when in fact people are lowering their own living standards in what is an affordability crisis in both countries.”
Clausing contends that Carney is “immensely popular” with his constituents because he’s pushed back against recent comments Trump has made threatening Canadian sovereignty, which have angered many Canadians. While Trump’s approval rating has remained low in the weeks since the trade war with Canada began, Carney’s has increased, with 53% of Canadians holding a positive view of their Prime Minister, according to data shared by the polling firm Abacus Data.
“Even though the retaliatory tariffs will ultimately hurt them, I think the Canadians are willing to withstand a fair amount of pain, in part because they view the stakes as very large,” Clausing says. “In contrast, I don’t think Americans have a beef with Canada … so I don’t think the American consumers are going to be as willing to endure pain.”
Tensions continue to rise between the U.S. and Canada
Tensions between the U.S. and Canada have continued to escalate in recent weeks. On Aug. 27, Trump signed an Executive Order that instructed his Interior Secretary to rename Lake Ontario to “Lake America”—an action that infuriated Canadians and that many politicians in both countries rejected. Over the weekend, Trump shared an illustration on Truth Social of himself and Carney wearing hockey gear, in which Carney is on the ground and Trump is depicted as saying, “Get up, governor.” Trump has referred to Carney as the “governor of Canada” in the past—rhetoric that seemingly undermines Canadian sovereignty, similar to the times when Trump has called Canada the “51st state.”
Clausing says she worries that the tension between the two countries will continue to damage their economic relationship, and could lead to the conflict spiraling and impacting even more industries.
“I think one feature of the U.S.-Canada trade war so far has been that the rhetoric has been larger than the impact,” Clausing says. “So far, the damage has been limited, but it’s still real. I think even the rhetoric around this trade war has really diminished Canadian interest in doing business with the United States.”
“It’s difficult to overstate how upset Canadian people and businesses are by this situation and by these threats to their sovereignty,” she continues.
Morrow says he’s concerned that the rising tensions between the two countries make it seem likely that they are “inching towards a scenario of escalation.”
“At some point, there’s going to have to be an offer—there’s going to have to be an off-ramp,” Morrow says. “I don’t see that off-ramp right now, and that’s what makes me most concerned.”