No One Wins the United States–Canada Trade War

Mia Ruddock | United States Fellow

Image sourced from Thomas K on Pexels

On 8 September 2026, United States (US) President Donald Trump announced that the US will ban Canadian dairy products, alcoholic beverages, and motorcycles. As the latest in a series of escalating trade hostilities between the neighbouring countries, the US and Canada are now locked in a trade war.

The White House claims this trade war is about “ending Canada’s free ride”. For Canada, which Trump has repeatedly referred to as the “51st state”, it is a fight for sovereignty. Even as the trade war risks becoming increasingly protracted, forcing Canada back to the negotiating table may be more difficult than US officials claim.

The US feels they have the economic upper hand. But the most severe consequences may not be economic but political, as Trump’s policy of weaponised tariffs alienate both voters at home and allies abroad.

How did we get here?

Tariffs have been a consistent tool of Trump’s second term. Ostensibly to protect US industry, they have also been used to economically pressure other countries to the White House’s policy agenda.

Canada itself has been a consistent target. On 21 July, Trump’s planned 50% increase of various tariffs went into effect. The White House argued that Canada had encouraged a “trade deficit” and prevented the sale of American goods in domestic markets. Canada responded with retaliatory tariffs of up to 50% on roughly US$20 billion worth of US goods, and Trump’s response is the latest in this escalation.

How will Canada be impacted?

Prime Minister Carney acknowledged a trade war “won’t be easy”. The US purchases roughly 70% of Canadian exports. Specific industries, such as Canada’s manufacturing sector, may be particularly affected by US tariffs on steel, aluminium, and other key materials. Canadian provinces heavily reliant on US trade, like Ontario and Quebec, are particularly vulnerable. Smaller businesses may also struggle with rising costs.

However, Canadians feel the trade war symbolises a more existential threat. According to an Ipsos poll, 63% of Canadians support pushback against US trade demands even if it creates “higher costs and job losses”, with many boycotting US goods. With this mandate, Carney has floated pressuring the US through the energy sector, given that Canada is a significant supplier of natural gas, electricity, and crude oil.

With many Canadians already facing economic struggles, an extended trade war and possible recession might dampen support for Canada’s stance. However, with the Canadian government deploying relief measures, for now there appears to be a consensus: if a hardline stance means guaranteeing Canada’s long-term sovereignty and trade stability, Canadians are perhaps more willing to face short-term financial strain than the US anticipates.

How will the United States be impacted?

According to US Trade Representative Jamieson Greer, the trade war is “more [Canada’s] emergency than ours”. But, while the US economy may not feel the repercussions as acutely, there will still be fallout. US industries like automotive manufacturing and farming are heavily dependent on materials now subject to tariffs. Instability in these markets will likely filter down to American consumers through increased prices. Areas proximate to Canada — such as Detroit, which hosts over US$1 billion worth of trade with neighbouring Canadian city Windsor — may also be disproportionately affected.

The greatest negative impact for the US may in fact be political. Just 20% of Americans approve of Trump’s tariffs on Canada, a stark contrast to Carney’s political support. The trade war will likely continue through the November midterms, with CNN polling from July finding 65% of Americans believe Trump’s policies have “worsened economic conditions”. With Americans already sceptical, new Canadian tariffs could become a deciding factor for voters.

What happens next?

The US-Canada trade relationship was once one of the most stable and prosperous in the world. While geographic proximity and deeply entwined industries means bilateral trade won’t completely cease, this war may cause considerable damage to both their trade and diplomatic relationships.

Most recently, Canada signalled interest in becoming a European Union (EU) ‘associate member’, likely involving increased trade, defence, and technological cooperation with EU member states. Such a move illustrates the deeper impact the trade war might have on international affairs, where Canada’s resistance could become a lesson to US trading partners to look beyond an increasingly unreliable and self-interested economically.

As such, escalating tariffs against Canada may prove to be a critical misstep for the US domestically, frustrating American voters who want economic burdens addressed, and an isolating factor for the US globally. The US may ‘win’ this trade war through better weathering its immediate economic impacts. But the longer Canada can withstand US tariffs, the worse it will look for the Trump administration.

Mia Ruddock is a recent graduate of The University of Melbourne, with a Bachelor of Arts majoring in Politics and International Studies, and History. As the United States fellow, Mia hopes to contribute original, thoughtful and carefully researched analysis to explore the rapidly evolving and unique geopolitical role of the United States today.

Disclaimer: The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views and opinions of Young Australians in International Affairs. AI tools were used by this author for grammar checks, but all content is original, and no plagiarism has been used in the preparation of this article.