U.S.-Canada Trade War Escalates Amid New Developments

New developments in the U.S.-Canada trade war have emerged since Section 338 tariffs took effect on August 22, including Canadian government support measures and counter-tariffs.

Despite these new measures, RBC's base case outlook for Canada's growth this year remains cautiously optimistic. However, recent events have taken some shine off signs of building economic momentum, tilting the balance of risks towards the downside.

New tariffs imposed in August will significantly impact specific sectors and industries, but they affect a small share of the total economy. U.S. tariffs impact about 5% of Canadian exports to the United States, and about 0.4% of Canadian gross domestic product and jobs.