In the latest round of the Great North American Tariff Tango, Canada and the US have once again decided that the best way to show friendship is to slap taxes on each other's goods. This week, Canadian Prime Minister Mark Carney fired back at President Donald Trump's tariff threats with a fresh batch of retaliatory import taxes on a smorgasbord of American products. Because nothing says 'diplomacy' like a 50% tax on cars.
Let's start with the automotive industry, where the stakes are as high as the tariffs. Trump has threatened to raise tariffs on Canadian vehicles from 25% to 50% starting 1 January 2027. If that happens, it's not just car manufacturers who'll feel the burn. Bernard Yaros, lead economist at Oxford Economics, notes that car dealerships have so far absorbed the 'lion's share' of increased costs, but 'that cushion is wearing thin.' In other words, consumers might soon be paying more for that shiny new SUV, or perhaps settling for a slightly less shiny used one.
Carney, ever the strategist, has declined to match the 50% threat on autos, but a 25% import tax on certain American vehicles has been in place since last year. Meanwhile, construction materials like steel, aluminium, and lumber are also caught in the crossfire. Canada has matched US rates on metals at 50%, and added import taxes on plywood and even screws. Because why not tax the very things that hold houses together? The Forest Products Association of Canada warns that tariffs will 'raise costs on both sides of the border,' while Bill Owens, chairman of the National Association of Home Builders, pleads with Trump to exempt building materials, citing an 'ongoing housing affordability crisis.' In 2024, the US imported $23bn (C$32bn, £17bn) worth of wood products, nearly half from Canada. So, yes, this could get pricey.
But the real twist in this tariff tale is the targeting of household goods. Carpets, washing machines, furniture, fridges, and even knives, forks, and spoons are now subject to Canadian tariffs. Bradley Saunders, North America economist at Capital Economics, suggests this is a calculated move: Carney is picking goods where Canadians can easily 'shift to domestic suppliers instead.' As Saunders puts it, 'Like hair care products, you really can just buy that domestically instead.' So, while Americans might see marginal price increases on furnishings, Canadians can smugly buy local.
And let's not forget the booze. Last year, many Canadian provinces banned US alcohol in response to earlier tariffs, and the American wine and spirits industry saw exports drop by over 70%. Carney asked provinces to restore US alcohol during trade talks, but now that talks have collapsed, the bans are likely to return. Saskatchewan and Alberta are the only provinces still selling American alcohol, but Saskatchewan has announced a 50% charge on US booze starting 8 September. Cheers to that.
Beyond prices, there's the bigger picture: job losses. Saunders warns that a bespoke furniture producer in British Columbia facing a 50% tariff on exports could 'really shut the business down.' Canada's forest industry employs nearly 200,000 people, and while they're calling for government support, they admit 'no support package can replace reliable access to our largest export market.'
For US consumers, the direct cost of this latest spat is surprisingly small. John Iselin, associate director at the Budget Lab at Yale, estimates the cost at about $3 per American household on average. But factor in Trump's wider trade war, especially with China, and that figure jumps to about $1,000 for the average family. As Iselin notes, 'It's hard to view this particular instance with Canada in isolation because we've had similar interactions with a range of other countries, all of which makes doing business harder. It's just another in a series of tariff shocks.'
And so the tariff tango continues, with both sides stepping on each other's toes and consumers footing the bill. The USMCA, the free-trade agreement between the three North American countries, remains operational, but the US has refused to renew it in its current form. Talks are on hold, and uncertainty reigns. But hey, at least the knives and forks will be Canadian-made.