An ‘Elbows Up’ Trade War: True North Strong and No Longer Tariff Free
Mikaela DesLauriers | 11 April 2025
Summary
As of March 2025, the United States (U.S.)-Canadian trade war has escalated with tariffs disrupting long-standing socio-economic cooperation.
Consumers and businesses on both sides of the 49th parallel face rising costs and market shifts, with Canada diversifying trade partners and U.S. industries facing price surges.
The trade war marks a major shift in North American commerce, with long-term implications for economic policies and global trade dynamics.
Historically strong allies and economic partners, the U.S. and Canada are now embroiled in an escalating trade war. On 4 March 2025, US President Donald Trump’s administration implemented 25%tariffs on most Canadian imports and 10% on energy. In response, Canada imposed retaliatory 25% tariffs on USD 30 billion (GBP 20 billion) worth of U.S. goods, with plans to increase this to USD 155 billion (GBP 119 billion) in April if the trade war continues. This trade conflict coincides with Canadian Prime Minister Trudeau’s final weeks in office, during which he took a firm stance against U.S. economic pressures.
Both American and Canadian consumers face rising costs as political tensions increase in the face of Trump’s 51st state comments. With their elbows up, Canadians are shifting their buying habits, boycotting American goods, and supporting local and alternative markets. Canadian grocery chains and retailers are demarking Canadian-made products with a maple leaf and actively removing American products, such as wine and liquor, from their shelves.
South of the Great Lakes, the most immediate impact for American consumers is felt in the energy and automotive industries. Electricity prices in northern states reliant on Canadian power are climbing, and vehicle prices are expected to rise by an average of USD 6,000 (GBP 4,610) due to disrupted supply chains. Additionally, the tariffs are expected to exacerbate economic instability that will discourage manufacturing innovation, making businesses hesitant to invest in long-term projects.
Among the Trump administration’s justification for undermining the 2020 U.S.-Mexico and Canada Trade Agreement, the U.S. federal government views tariffs as a means of asserting economic power and addressing border security concerns. However, critics argue that Canada is not a major contributor to irregular immigration or fentanyl trafficking, making the Trump tariffs seem more political than practical.
The broader economic consequences of this trade war extend beyond North America, as global markets react to the instability. Mexico, the U.S.’ second largest bilateral trading partner, is also impacted, with structural economic shifts likely to result in long-term changes to North American trade patterns. Meanwhile, China is leveraging the dispute by imposing its tariffs on Canadian and American imports, adding further complexity to the region’s economic outlook. Regardless of whether a resolution could be reached, the era of free trade is replaced by the rise of protectionism, as marked by Trump’s extensive use of tariffs.
sebastiaan stam/Unsplash
Forecast
Short-term
Canadian industries will likely face increased economic strain, requiring the new administration to respond as businesses accelerate trade diversification efforts.
Long-term
Likely permanent shifts in North American trade routes, with Canada securing new long-term trade agreements outside of North America.
Almost certain structural economic realignment in North America, with diminished U.S. dominance in Canadian trade and a stronger Canadian presence in Asian and European markets.