Trump vs Carney: Cars, homes, booze and more caught in US-Canada tariff war

The US-Canada trade war has escalated with additional tariffs on a variety of products, including automobiles, construction materials, household items, and alcoholic beverages. Canadian Prime Minister Mark Carney's government responded to US President Donald Trump's threat of increased tariffs by imposing retaliatory duties on selected US goods.

Since Trump took office, the two North American nations have engaged in a contentious economic conflict, with recent tariff hikes potentially impacting jobs, investments, and cross-border commerce. As the USMCA trade agreement between the US, Canada, and Mexico faces greater uncertainty, the repercussions of these tariffs could be far-reaching.

Carney announced a 25% import tax on certain American vehicles, echoing Trump's vow to raise tariffs on Canadian imports from 25% to 50% in January 2027. Auto manufacturers and dealerships have absorbed the burden of prior tariffs, but Yaros, an economist at Oxford Economics, warns that the forthcoming 50% tariffs could soon be passed on to consumers. Higher import costs may steer manufacturers towards more expensive vehicles like SUVs and pickup trucks, potentially driving up the cost of used cars as well.

In addition, Canada has imposed duties on several US building materials, such as steel, aluminum, lumber, wood products, and wood-based items. These measures could raise housing costs and strain supply chains, prompting car dealerships to absorb the cost increase through higher prices. The US imported $23 billion worth of wood products from Canada in 2024, with almost half of these goods originating in Canada, according to a US Congress report.

The US also faces tariffs on carpets, washing machines, furniture, refrigerators, knives, forks, and spoons. Saunders, a North America economist at Capital Economics, anticipates that the tariffs will mainly lead to minor, temporary price increases for American consumers.

The ban on US alcohol sales in several Canadian provinces, prompted by earlier tariffs, is expected to return as the trade talks have stalled. Quebec, Saskatchewan, and Alberta remain the only provinces that allow the sale of American alcohol. Saskatchewan has imposed a 50% charge on US-imported alcohol from September 8, when the expanded Canadian tariffs come into effect.

Job losses and heightened uncertainty could have a more significant impact on households than the rise in prices. Canada's forest industry employs nearly 200,000 people and has urged the government to stimulate domestic demand through federal housing programs to increase the use of Canadian wood. For US consumers, while the immediate impact on living costs is likely to be minimal, the trade tensions could lead to long-term economic effects and uncertainty surrounding the USMCA, the free-trade agreement between Canada, the US, and Mexico.