Trade war with Canada escalates

“Canada imposed tariffs of 15% to 50% on hundreds of products from the US on Tuesday, as Prime Minister Mark Carney bets that standing up to President Donald Trump will eventually help Ottawa’s negotiating position with its biggest trading partner,” reports Bloomberg News. “Carney’s government increased the import tax on many US steel items to 50% from 25%, and applied tariffs to a range of consumer goods — motorcycles, cosmetics, cheese and more — at 12:01 a.m. New York time. The measure will hit US exporters particularly hard in states such as Michigan and Ohio that do a lot business with Canada and host heated races in November’s midterm elections. It’s a calculated risk for Carney, who a year ago removed many of the counter-tariffs his predecessor, Justin Trudeau, had implemented. Trump administration officials have repeatedly said they won’t tolerate retaliation and noted that only two countries, Canada and China, have used counter-tariffs.”

The U.S. government has declined to say how or when it may respond with additional tit-for-tat tariffs of its own in retaliation for Canada’s retaliatory tariffs.

“Canada’s retaliatory tariffs are meant to make the cost of this trade war real enough for American businesses and consumers that Washington sees a clear incentive to return to the table,” said Brian Clow, who was an adviser to Canada’s former prime minister Justin Trudeau. “Canada isn’t imposing these tariffs because it wants a trade war. It’s imposing the tariffs because it wants the trade war to end.”

Yesterday, Trump threatened to ban sales of Bombardier jets in the US, accusing the Canadian company of profiting “off American Buyers.” Bombardier has over 2,800 US-based suppliers. Its Global 7500 jet has wings made in Texas, avionics made in Iowa and motors made in Indiana.

U.S. and Canadian negotiators attempted for weeks to reach a deal to resolve the trade dispute, and had seemed to agree on most of the terms to an agreement before the deal fell through. Trump even announced three weeks ago that the U.S. and Canada had a preliminary deal and gave Canada three more days to work out the details. But then the deal fell apart.

As Bloomberg News notes, “The collapse of those talks ushered in two weeks of venting and criticisms from both governments. Each side blamed the other for torpedoing an agreement in the final hours.” Over Labor Day weekend, the U.S. Treasury Secretary compared Canada to a “little yippy dog” barking at a much bigger one.

Trump hinted at additional retaliatory tariffs two days ago, saying “Canada’s (currency) Dollar imbalance with the U.S. is unacceptable,” he wrote in a Truth Social post. “It has been that way for years — but no longer!” White House officials declined to spell out what he meant.

American tariffs of 50% on $20 billion worth of Canadian products went into effect on August 22. Canadian officials announced their counter-tariffs three days later, which target an equal dollar amount of American products.

Angered by Trump’s tariffs and his talk of making Canada the “51st state,” Canadians are visiting the U.S. less than they used to, costing America tourism revenue. Axios reported recently that Canadians’ travel pullback has cost U.S. tourism businesses billions of dollars:

Canadian travel to the U.S. fell 25% last year, according to a new Canadian government report, which says early 2026 data show the decline has persisted….The report provides some of the clearest measures yet of the economic cost to the U.S. tourism industry after trade tensions, tariffs and President Trump’s repeated “51st state” comments led many Canadians to vacation elsewhere.

• “Following the change in the U.S. administration in early 2025 and the implementation of America First policies, Canadian travel sentiment shifted abruptly,” the report says.
• Statistics Canada says Canadians’ return trips from the U.S. declined year over year for 11 consecutive months in 2025 — the longest sustained decline outside the pandemic since digital records began in 1972.

Canada has traditionally been the largest source of international visitors to the U.S.

Canadians spent C$3.3 billion ($2.3 billion) less on trips to the U.S. in 2025, with lower leisure travel accounting for most of the decline…Travel spending on visits to the U.S. fell to C$18.8 billion, down from C$22.1 billion in 2024…Spending on overseas leisure trips, meanwhile, rose C$3.6 billion to C$22.8 billion, accounting for just under half of Canadians’ total spending on trips abroad.

Canada’s trade surplus with the U.S. has shrunk somewhat since April 2025, amidst Trump’s tariffs. By contrast, Brazil has actually increased its exports to the United States after Trump imposed tariffs on it. That may be because the U.S. simply doesn’t produce many of the things Brazil exports to it, like coffee, so Americans can’t substitute U.S. goods for Brazilian goods, but rather, simply have to pay a higher price for Brazilian products due to the tariffs.

Brazil used to be an energy importer, but now its biggest export is oil, much of which it exports to China. Oil production in Brazil has risen from 3 million barrels per day in 2022 to about 4.5 million barrels per day in 2026.