Canada braces to face a new round of 50% U.S. tariffs this week. Businesses said it may cause job losses in some already struggling sectors. It may also complicate broader negotiations over the future of North America’s free trade agreement (FTA).
Last month, U.S. President Donald Trump invoked Section 338 of a Depression-era U.S. law. It’s known as the Tariff Act of 1930. It’s to impose duties commencing on Wednesday, 19 August ’26, on a range of Canadian imports. It includes wine, furniture, dairy products, cement, clothing, fishing rods, and hockey equipment, besides some other goods.
That provision allows the U.S. president to impose punitive tariffs of up to 50% against trading partners if they are deemed to have discriminated against U.S. goods.
Trump’s unprecedented use of this power is part of his hardline stance towards trade with Canada. This has been the case since he returned to the presidency last year. Canada’s the No. 2 trading partner of the U.S., only behind Mexico.
According to U.S. Census Bureau data, the tariffs may cover nearly USD 20 billion of Canadian goods. This amounts to about 5.2% of the USD 383 billion worth of goods the U.S. imported from Canada.
When asked about the looming tariffs & prospects for a deal, Prime Minister Mark Carney declined on Monday, 17 August, to discuss details of what he described as intense & delicate negotiations with the U.S. Meanwhile, Carney said he expects to speak with Trump before the deadline.
Canada’s minister responsible for U.S. trade relations, Dominic LeBlanc, together with its chief trade negotiator, Janice Charette, has stepped up talks with their U.S. counterparts.
According to a source briefed on the matter, LeBlanc told an advisory committee on Friday, 14 August ’26, that both Canada and the U.S. may still be far from reaching a draft trade deal. This situation is despite the regular meetings.
On Monday, 17 August, two sources from the automotive sector informed Reuters that auto tariffs on Canadian-made vehicles have become a significant obstacle in these negotiations.
Unlike many of Trump’s earlier tariffs, the new duties may apply even to products that qualify for preferential treatment under the Canada-U.S.-Mexico (CUSMA) Agreement. CUSMA has shielded much of Canadian trade from tariffs, although it poses an added risk to the Canadian economy.
Last month, Trump refused to extend the CUSMA agreement for another 16 years while subjecting the pact to annual reviews. This agreement is a process that is likely to prolong trade uncertainty, which has hindered investments and Canadian job growth.
Individual sectors may face the brunt of these tariffs. The tariffs may lead to more job losses besides lower growth. Canada’s struggling wood product sector as well as the wine sector have already been affected by raging wildfires in the country’s west. The new tariffs could have a significant impact on them.
Noncompetitive economically
Cabico Ltd is a custom kitchen cabinet brand in Canada. Its owner, Alain Ouzilleau, said that if the tariffs are imposed, the consequences for the sector may be severe.
Ouzilleau added that a 50% tariff is something manufacturers could not absorb. Nor can it be expected for their U.S. customers to absorb it. Besides, it may make certain Canadian-manufactured products economically noncompetitive virtually overnight in the U.S. market.
Small, as well as medium-sized, businesses may be particularly vulnerable, as many rely heavily on tariff-free access to U.S. customers.
Dan Kelly, the President of the Canadian Federation of Independent Business, stated that if the tariffs are implemented, they could cause significant disruption for small businesses that depend on U.S. clients, as well as for American buyers who rely on Canadian suppliers.
At stake are broader talks
According to a University of Toronto economics professor, Joseph Steinberg, the tariffs may still maintain Canada as one of the lowest tariff rate countries to export to the U.S. Steinberg added that the greater concern is whether another escalation in the U.S.–Canada trade dispute may halt talks over the broader CUSMA agreement. Also, what happens to the affected sectors?
