US-Canada Trade War Enters New Phase as Tariffs Bite

The ongoing trade dispute between the US and Canada has seen both countries imposing tariffs on each other's goods, with no resolution in sight. The US has targeted Canadian sectors such as steel, aluminum, lumber, and automobiles, while Canada has retaliated with its own counter-tariffs on American goods.

According to data from Statistics Canada, Ontario has been the hardest hit province by the auto and steel tariffs, with several plants announcing layoffs and production cuts. The Royal Bank of Canada estimates that Ontario and Quebec are the most impacted by US sectoral tariffs.

The impact of the trade war is not limited to Canada, as some US states will feel the pain of Canada's retaliation more than others. Ohio is expected to be hardest hit, with 12% of its exports soon to be tariffed by Canada, followed by Illinois and Pennsylvania.

Canada's economy has been affected by the trade war, but it has also shown resilience. The country's GDP grew at a rate of 3.3% in the second quarter of 2026, thanks to a jump in exports and domestic investment. Foreign direct investment into Canada hit C$96.8 billion in 2025, the highest inflow of capital since 2007.

However, the trade war has also had a negative impact on jobs and disposable income on both sides of the border. An analysis by the Canadian American Business Council estimates that tens of thousands of jobs could be lost if the USMCA fails, primarily in manufacturing industries reliant on the US market.