Canada's Tariff War: Ottawa Extends Fuel-Tax Suspension Amid Counter-Measures

The Canadian government has extended the federal fuel-tax suspension until January 31, 2027, saving motorists 10 cents per liter on gasoline and four cents per liter on diesel. This move comes as Canada prepares to impose counter-tariffs of 15%, 25%, and 50% on $27.6 billion worth of American goods starting September 8.

This decision is seen as a more surgical approach compared to last year's tariffs, which were imposed on selected American foods and other consumer goods. The new list targets industrial sectors such as steel, aluminum, furniture, appliances, agricultural equipment, pulp and paper, and electronics, with some exceptions in the food category.

The federal government's response appears more focused this time around, with a smaller grocery impact expected due to the targeted nature of the tariffs. However, experts warn that consumers may still face higher prices on certain products, such as imported American cheese and honey.

According to research by the Bank of Canada, approximately one-quarter of the 2025 counter-tariffs was passed through to retail prices, adding about 0.3 percentage points to overall consumer inflation. The government's decision to extend fuel-tax relief until January 31, 2027, will partially offset transportation costs across the food supply chain.