Tariffs in Canada: Making Sense of the U.S.-Canada Dispute
Buckle up, friends. The trade war is here, and the ride could be bumpy.
On March 4, 2025, new U.S. tariffs on billions of dollars worth of Canadian goods went into effect. The tariffs imposed on Canadian goods heading south — 10% on energy exports, 25% on everything else — were met with retaliatory tariffs that target $30 billion of U.S. exports to Canada.
The Canadian government has threatened to institute tariffs on a further $125 billion worth of U.S. goods in 21 days.
“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Prime Minister Justin Trudeau said in a statement on March 3, 2025.
It’s a frustrating, confusing moment in Canadian history. Here’s what we know so far.
A tariff timeline
On March 6, 2025, Trump signed an executive order that temporarily paused tariffs on Canadian goods that are covered by the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
On March 5, 2025, Trump ordered a one-month tariff exemption for automakers.
On March 4, 2025, Trump followed through on his original tariff threat, implementing a 25% tariff on all Canadian goods aside from energy exports, which are subject to a 10% levy. Canada responded by applying 25% tariffs to $30 billion worth of goods imported from the U.S.
On February 3, 2025, the U.S. and Canadian governments announced a 30-day suspension of tariffs. As part of the agreement, Canada has pledged to improve security along the U.S.-Canada border at a cost of at least $1.5 billion.
On February 2, 2025, the Canadian government issued its response, with Prime Minister Justin Trudeau announcing that Canada will impose 25% tariffs against $30 billion worth of American goods on Tuesday, February 4, 2025. Tariffs on an additional $125 billion worth of American goods were to take effect three weeks later.
On February 1, 2025, U.S. President Donald Trump issued an executive order to impose 25% tariffs on goods imported from Canada. Energy resources would be subject to slightly lower tariffs of 10%, according to the order. The U.S. tariffs were to take effect on Tuesday, February 4, 2025.
Tariffs: The basics
At their simplest, tariffs are taxes applied to goods that are imported from a foreign country. Tariffs aren’t new, in fact, nearly all developed countries impose some kind of tariff.
There are a few main types:
Ad valorem: A percentage-based tariff applied to an item’s value (10% of a car’s price, for example).
Specific: A fixed amount per unit, regardless of the item’s price (such as, $5 per kilogram of imported cheese).
Rate quota: Lower tariffs that apply up to a certain import limit, and then trigger an increase after the quote is exceeded.
Blanket tariffs: A single tariff rate that applies across all imported goods from a specific country, regardless of the product type or value (such as, “25% on all Canadian goods”).
Who pays tariffs?
Tariffs are paid by the companies who import foreign goods — not the exporting countries. The U.S. companies that import Canadian goods will pay the tariffs announced by Trump. Canadian companies will pay the tariffs announced by Trudeau.
Companies often raise their prices to offset the cost of tariffs. In these cases, consumers might wind up “paying for” the tariffs, but they don’t literally pay the tariffs themselves.
What tariffs have been announced so far?
U.S. tariffs on Canadian goods
Trump’s tariff announcement includes a 25% levy on goods exported from Canada to the U.S. A smaller 10% tariff applies to Canadian oil.
It’s important to note that the White House characterized the move as implementing “additional” tariffs on Canada, so it’s not as if this is a brand new phenomenon. U.S. tariffs on Canadian softwood lumber, for example, have been in effect for years.
Canada’s tariffs on U.S. goods
The Department of Finance has released a list of over 1,200 American goods now subject to 25% tariffs, including:
Poultry and eggs.
Dairy.
Sugars, chocolate and ice cream.
Sausages and other prepared meat.
Citrus, melons, apricots, cherries, peaches, tomatoes and several berries.
Nuts and preserved fruit.
Beer, wine and other fermented beverages.
Sauces and condiments.
Coffee and tea.
Seasonings: pepper, nutmeg, vanilla, ginger and several common herbs/seeds.
Wheat, rye, barley, oats and rice.
Pasta.
And that’s just a fraction of the food and drink items included. Clothes, tires, floor coverings, soap and shampoo — it’s a worryingly long list of items that could cost you more.
Why is the U.S. imposing tariffs on Canada?
A country may put tariffs into place for a variety of reasons, such as:
Increasing national revenue through import taxes.
Reducing a perceived reliance by limiting the consumption of goods produced outside the country.
Protecting domestic companies and jobs by making foreign goods more expensive.
Applying economic pressure on a trading partner.
Despite these possible economic rationales, Trump's justification for the tariffs has mostly focused on the "flow" of fentanyl and undocumented immigrants into the U.S. from Canada — claims that have little statistical basis but are apparently useful as a bargaining chip.
In its initial announcement of the levies, the White House said tariffs would be implemented until “the crisis is alleviated.” However, with no clear criteria outlined, it remains uncertain what conditions would lead to the threat of tariffs being lifted.
“Even the excuse that he’s giving for these tariffs today, of fentanyl, is completely bogus, completely unjustified, completely false,” Trudeau told reporters during March 4 news conference on Parliament Hill, adding that Trump’s intent is the “total collapse of the Canadian economy.”
» Learn some survival strategies for times of high inflation
How could these tariffs affect you?
Whatever the intention, tariffs often have negative consequences for consumers — in both countries involved.
If they are implemented, the potential effects of Trump’s tariffs on Canada include:
Higher prices. In addition to suppliers having to raise their prices because of increased costs, there’s also the risk of higher demand for locally-produced items leading to shortages and price spikes of their own.
Job losses in industries that depend on exports. Food, automobile, aerospace and petroleum producers could all take a major hit.
Escalating tariffs. Trump has reportedly threatened to impose even higher tariffs in response to Canada’s retaliation.
Global supply chain disruption. If U.S. importers turn to non-Canadian countries for their goods, that increased demand could hamper production capacity and put pressure on shipping routes.
Canada exports billions of dollars in goods and services to the United States each day. If demand for those goods were to suddenly dry up because American companies don’t want to pay tariffs, it could have dire consequences for the economy — including recession.
Some estimates of the potential damage include:
A 2.6% decrease in Canada’s GDP, costing Canadian households an average of $1,900 annually, according to the Canadian Chamber of Commerce.
The loss of more than 150,000 Canadian jobs, according to analysts at Oxford Economics — although government officials in some provinces predict much higher numbers.
Potential inflation, as higher costs trickle down to consumers.
“At a minimum, a permanent tariff will cause a one-time, permanent increase in price levels,” the Bank of Canada stated in its January 2025 Monetary Policy Report. “Whether tariffs lead to ongoing inflation will mostly depend on how household and business expectations for inflation respond to tariff-related price level increases.”
This story will be updated as events progress.
» Be prepared: 3 ways to spend less on food
Sources
NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines.
- Council on Foreign Relations. What Are Tariffs?. Accessed Jan 30, 2025.
- PBS. Trump favors huge new tariffs. How do they work?. Accessed Jan 30, 2025.
- Georgia State University. Are tariffs good or bad for the economy? Research says they can be bad for the supply chain. Accessed Jan 30, 2025.
- Canadian Chamber of Commerce. The Cost of Canada-U.S. Trade Disruption on Full Display with New Trade Tracker. Accessed Jan 30, 2025.
- ICIS. INSIGHT: Trump’s 25% tariff would trigger broad recession in Canada. Accessed Jan 30, 2025.
- Bank of Canada. January 2025 Monetary Policy Report . Accessed Jan 30, 2025.
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