Who Wins and Who Loses in the US-Canada Trade War

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On August 22, 2026, the United States began charging a 50 percent tariff on a list of Canadian goods that ranged from wine to hockey sticks. Each government says its tariffs protect its own workers.

Protection for one domestic producer can become a higher bill for another. A factory buying taxed materials can find savings elsewhere, accept a smaller profit or charge its customers more. The policy that helps keep one mill open can therefore squeeze another employer or reach workers through the prices they pay.

A tariff starts as an import bill

The person or business responsible for the customs entry, called the importer of record, is responsible for applicable duties, taxes and fees even when it hires a customs broker, according to U.S. Customs and Border Protection. Who pays at the border and who ends up bearing the cost are different questions.

Businesses can respond by negotiating with suppliers, changing suppliers or production methods, accepting lower profit margins, or passing costs to customers, Federal Reserve officials reported in their July 2025 meeting minutes. At that meeting, a few officials observed that evidence so far suggested foreign exporters were paying at most a modest part of the increased tariffs, which implied that domestic businesses and consumers were bearing most of the cost. There is no rule that every tariff becomes an equal percentage increase at the checkout.

The rate is also not always charged on a product’s full value. For approved passenger vehicles and light trucks that qualify for favorable tariff treatment under the United States-Mexico-Canada Agreement (USMCA), the three countries’ trade pact, a 25 percent U.S. tariff on automobiles applies only to the value of non-U.S. content. That rule is for the automobile tariff alone; the Canada-specific tariffs described below are separate.

The current rules depend on the product

The tariff followed earlier U.S. tariffs on Canadian goods, some still in force, that have raised trade tensions since 2025. Canada answered on September 8 with retaliatory tariffs on C$27.6 billion (US$20 billion) worth of American goods. The two countries traded an estimated $715.5 billion in goods in 2025.

The Canada-specific tariffs took effect on August 22, 2026, after the two governments failed to reach an agreement. They imposed a 50 percent duty on specified Canadian goods in response to what President Donald Trump described as discrimination against U.S. commerce involving alcohol, dairy and motor vehicles. The president acted under Section 338 of the Tariff Act of 1930, a law no president had expressly cited before to impose tariffs.

After Canada retaliated, the White House changed the covered product lists effective September 15, 2026, removing goods including rock salt and cement while adding others. It also banned imports of certain Canadian goods, effective September 29, 2026. A ban keeps a product out entirely; a tariff lets it in at a higher cost.

The September import bans cover products including alcoholic beverages, certain dairy goods, molasses and motorcycles, according to CRS.

The Section 338 duties apply to covered goods whether or not they qualify under USMCA. Since September 15, most Section 338 tariffs also apply on top of Section 232 tariffs, the separate duties on industries such as steel and automobiles, so a good covered by both programs can owe both.

Section 301 of the Trade Act of 1974 is the authority behind the 10 percent tariff on most Canadian goods imposed in July 2026 after a U.S. investigation into enforcement of forced-labor import bans.

For a Canadian steel beam covered by both programs at their full 50 percent rates, the two additional tariffs total 100 percent of the customs value: $1,000 in these tariffs on a $1,000 beam, before any other charges.

The table below shows the main U.S. tariffs on Canadian goods as listed in a Congressional Research Service report updated September 16, 2026. It is a starting point: product exceptions and the separate Section 338 measures still matter.

The September motor-vehicle addition list includes non-alloy steel beams, aluminum bars and tubes, and certain passenger vehicles with spark-ignition engines of 1,000 cubic centimeters or less.

Energy and potash are absent from that motor-vehicle addition list. The separate September alcohol-related addition list also contains no energy or potash.

Potash is a group of potassium-containing salts used primarily as agricultural fertilizer.

Energy and potash were excluded from the Canada-specific Section 338 measures announced in July 2026. That exclusion should not be read as a blanket exemption from every customs charge.

Energy trade between the two countries rests on physical links: existing pipelines connect the markets, and relatively complex U.S. refineries tend to prefer heavy crude oil such as Canada produces, the Energy Information Administration reports.

One earlier set of tariffs has ended: a February 2025 executive order imposed emergency duties on Canadian goods over the flow of illicit drugs across the northern border under the International Emergency Economic Powers Act. Customs and Border Protection stopped collecting those duties, and others imposed under that law, for entries beginning February 24, 2026.

Protection helps producers and raises input costs

Who wins and who loses depends on where a worker or business sits. A producer shielded from imports can gain. A manufacturer that buys taxed materials, an exporter facing a countertariff and a shopper paying a higher price can lose.

The American Iron and Steel Institute, a steel industry trade group, says the steel import measures begun in 2018 allowed mills to restart, workers to be rehired and investment in new or upgraded plants. The institute argues that a commercially viable domestic steel industry is necessary for national security.

In July 2025, the institute and four other steel groups urged the administration to retain steel tariffs during trade negotiations and avoid country deals that would reduce coverage. The groups argued that foreign subsidies and unfair trade practices encouraged overproduction of steel abroad, while U.S. mills were still using less of their capacity than the 80 percent goal identified in a 2018 Commerce Department report.

Manufacturers that use imported materials make a different case: the National Association of Manufacturers says tariffs increase the cost of raw materials, equipment and machinery needed to make things in America. The association estimates that even at full domestic production capacity, at least 16 percent of manufacturing inputs would still have to be imported. The association proposes preapproved duty-free access to necessary manufacturing inputs through a Manufacturing Tariff Speed Pass. The two groups want different things: one wants protection for the producers of a material, the other lower costs for its buyers.

Canada and the United States have highly integrated automotive and energy markets, according to the Congressional Research Service. The manufacturers association says Canadian and Mexican suppliers provide materials, parts, machinery and equipment that power American factories. A factory that moves its final assembly to the United States may still depend on parts and materials from across the border.

Retaliation creates another set of domestic costs

Canada’s response included countertariffs of 25 percent on appliances and dairy products, and 50 percent on specified steel and aluminum products, furniture and clothing. Some Canadian steel and aluminum countertariffs rose from 25 to 50 percent, while other existing countertariffs, including those on autos, remained in place.

Canada says its response is intended to protect producers harmed by U.S. tariffs and improve their competitive position in the Canadian market. Its official regulatory analysis also acknowledges that Canadian importers, distributors and retailers continuing to buy affected U.S. goods may pass some or all additional costs to businesses or consumers. Retaliation can put pressure on American sellers while making purchases more expensive inside Canada. Canada removed fish and seafood from its countertariff list after stakeholders warned about potential harm to domestic fish processing, according to the Canada Gazette.

U.S. goods trade with Canada totaled an estimated $715.5 billion in 2025, including $333.6 billion in American exports and $381.9 billion in imports, according to the Office of the U.S. Trade Representative. Canada sent 71.7 percent of its merchandise exports to the United States that year, Statistics Canada reports. The dispute reaches a large trading relationship, but Canada's exposure to its biggest export market is especially concentrated.

Earlier U.S. tariffs had already hit Canadian steel: with most of the industry’s exports to the United States facing a 50 percent tariff, steel exports had fallen by half, the Bank of Canada reported in April 2026. Production and employment fell by less, partly because government measures such as countertariffs supported domestic production, the bank said.

Jobs and investment are a harder test

The White House says its tariff policy is intended to strengthen American manufacturing, improve access to foreign markets and support workers and families. Canada says it seeks a comprehensive agreement that protects workers, gives businesses more certainty and respects Canadian sovereignty. Those objectives describe what the governments want; outcomes must be measured separately.

In a sector-wide tally released October 9, 2026, Statistics Canada reported that manufacturing employment fell by 13,000 in September after rising by 22,000 in August; it was little changed from a year earlier.

Canadian countertariffs could eventually feed into consumer prices, but their inflation impact is expected to be modest because they primarily target non-consumer goods replaceable with Canadian substitutes, the Bank of Canada says.

Federal Reserve economists Aaron Flaaen and Justin Pierce found that U.S. manufacturing industries more exposed to the 2018-2019 tariff increases experienced relative reductions in employment. In their analysis, larger losses from higher input costs and retaliation outweighed the positive employment effect of import protection, while input costs also pushed producer prices up. A gain at a protected mill is therefore compatible with losses elsewhere in manufacturing.

That earlier episode is evidence about a mechanism, not a numerical forecast for today's dispute. The current tariff mix, exemptions and restrictions differ, and the study compares industries with different exposure rather than counting every current gain and loss.

The manufacturers association says long-term investment requires stable trade policy and reliable access to critical inputs. The Bank of Canada reported in January 2026 that uncertainty had made some Canadian businesses and U.S. customers reluctant to trade with one another. It also warned that finding new markets and building export supply chains would take time and be costly.

What could change, and what businesses can do

USMCA required the United States, Mexico and Canada to hold a joint review of the agreement on July 1, 2026. At that review, the United States declined to renew USMCA in its existing form, but the agreement remained in force, the U.S. Trade Representative announced. Without renewal, USMCA is set to expire in 2036, according to the Congressional Research Service.

Separately, Prime Minister Mark Carney suspended bilateral trade negotiations on August 21, 2026 and directed Canada’s negotiators to return to Ottawa. In a September 4, 2026 update, Minister Dominic LeBlanc said Canada remained committed to constructive engagement toward a mutually beneficial agreement that respected Canadian sovereignty.

The legal basis matters too: ending one tariff program does not automatically end the others. Customs and Border Protection said the end of the emergency duties did not affect duties under Section 232 or Section 301, the two laws behind the tariffs in the table above.

Importers can request a written Customs and Border Protection ruling on a product's proper tariff classification and duty rate. Before importing, check the current tariff schedule and the agency’s trade-remedy notices for the exact product, then see whether a USMCA exemption or an added industry tariff applies.

A wholly obtained good is produced entirely within one or more countries in the trade agreement, such as crops grown or minerals mined there. A product-specific rule of origin can test whether imported components have changed tariff classification through production, whether the good contains a required percentage of regional value, or both.

Shipping a product from Canada does not by itself earn the USMCA exemption: a good that is not what the trade rules call “wholly obtained” must meet the rule of origin for that product. Customs and Border Protection says USMCA requires a certification of origin containing the nine minimum data elements in Annex 5-A, with no required format. The paperwork helps only where an exemption exists; it does not create one in a tariff program, such as Section 338, that has none.

Canadian businesses can request exceptional tariff relief when affected inputs cannot be sourced domestically or reasonably from non-U.S. suppliers, or when other exceptional circumstances could severely harm the economy. Canada’s Department of Finance assesses those requests, called remission requests, and relief requires exceptional and compelling public-policy grounds.