US-Canada Trade War Escalates as Tariffs Take Effect

The US and Canada are locked in a trade war over tariffs imposed by Washington on selected Canadian imports. In July 2026, the Trump administration invoked Section 338 of the Smoot-Hawley Tariff Act to impose additional duties on specified Canadian goods worth C$27.6 billion.

The measure came into force on August 22, imposing a 50% tariff on these selected Canadian imports. Ottawa has struck back with dollar-for-dollar counter-tariffs on selected U.S. goods due to take effect on September 8, while duties on American steel and aluminium will rise from 25 to 50%. The US has threatened to levy a 50% tariff on Canadian cars, trucks, and automotive parts starting January 1, 2027.

The tariffs are intended to protect domestic producers by making imported goods more expensive. However, the cost of that protection is distributed across the wider economy, with importers potentially passing higher costs on to consumers, while domestic firms may face higher production costs themselves.