How the US-Canada trade war is being felt on both sides of the border

The ongoing US-Canada trade war continues to impact both nations. President Donald Trump's administration has been involved in a wide-ranging global tariff program since taking office. Canada was one of the first countries targeted with levies, and responded with its own reciprocal measures. Currently, the US has imposed additional tariffs on Canadian goods, leading to retaliatory counter-tariffs from Canada.

The trade dispute has hit some states and provinces more than others. Ontario, the most populous Canadian province with a significant manufacturing sector, has been hardest hit, losing tens of thousands of manufacturing jobs. Quebec's metal exports dropped 36% and experienced a 3.6% employment decline in the sector. The impact on the US economy will be less severe, but some states like Ohio, Illinois, and Pennsylvania will feel the pain more than others, due to tariffs on steel, farm equipment, and other US goods.

The US economy is larger, so the counter-tariffs' impact on Canada will be less severe. However, Canada's average effective US tariff rate has nearly doubled to 5.7%, up from 2.9% in June. This is higher than Mexico's rate and approaching the levels faced by the UK and Vietnam. Canadian firms are increasingly exporting to countries other than the US, with the Bank of Canada reporting a rise in non-US exports since the trade war's onset.

Obliged to adapt, businesses like Toronto's Outclass are diversifying their customer base, attending trunk shows in Paris instead of New York. Despite these challenges, Canada's economy received the highest foreign direct investment since 2007 in 2025, signaling resilience in the face of the trade dispute.