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BUSINESS ACROSS THE BORDER

Pacheco: Canada won’t be bullied by its biggest neighbor

Published

What's the last country in the world that you think the U.S. would get into an uglier-by-the-day, insult-hurling, deepening trade war with? I think most of us would not choose our North American neighbor, Canada.

Having been part of the former British Empire, Canadians and Americans share similar culture and history. Both countries have fought and died side-by-side in wars against aggressors. Canadians send the U.S. entertainers such as Neil Young, Shania Twain, Leonard Cohen, Ryan Gosling and Keanu Reeves. We send Canada MLB, the NBA and television shows such as “The Simpsons,” “Friends” and “The Office.” There has not been a nation so close to the U.S. both diplomatically and culturally. However, by reading the daily news, one would not guess that this is true.

In February 2025, President Donald Trump imposed 25% tariffs on goods imported from Canada, even though most goods are supposedly protected from tariffs under the U.S.-Mexico-Canada Agreement, or USMCA. Canada retaliated by imposing 25% tariffs on U.S. metal imports, and then on automobiles. This significantly decreased the purchase of U.S. automobiles by Canadians. In response, in April 2025, incensed at Canada’s retaliatory tariffs, Trump imposed a 25% tariff on Canadian automotive products.

As required by the USMCA treaty, a sixth-year review was mandated for July 1, 2026. The U.S. had been negotiating with Canada on parts of this agreement — but talks fell apart on Aug. 21. The Trump administration then stated that it had “no choice” but to impose a 50% tariff on $20 billion of Canadian imports, including aluminum, steel, lumber and automotive components, starting Aug. 25. Trump also vowed to impose a 50% tariff on Canadian automobile imports on Jan. 1. In announcing the new tariffs, Trump posted on social media, “Canada has been ripping off the ϼ States of America for years. They feel entitled, and yet, WE DON’T NEED CANADA, THEY NEED US.” He also claimed that Canada had been unfair to U.S. dairy producers.

In response, Canada announced that it would pursue a dollar-for-dollar tariff strategy worth $20 billion on more than 600 U.S. imported goods, including appliances, cheese, milk, cream, toilet paper, tissue and wood pulp used to make these last two products. These tariffs will come into effect on Sept. 8. Canada also announced a $5.42 billion financial aid package for Canadian businesses affected by the trade war. Accompanying Canada’s new tariffs was an announcement by Canadian Minister of Industry Melanie Joly that the country is “also targeting products that will target states in the U.S. We’re being wise and strategic to put political pressure.” Canada is particularly targeting U.S. swing states such as Pennsylvania and Ohio.

What is really going on here? Canada is our second-largest trading partner, with U.S.-Canada bilateral trade worth more than $872 billion in 2025. The U.S. GDP was $30 trillion in 2025, while Canada’s GDP was $2.32 trillion. The U.S. exported $336 billion in goods to Canada in 2025, down about 3.8%, most of which is attributable to the tariff war. It is very hard to make a case that a country with a GDP less than 10% of that of the U.S.’s can be ripping us off. The U.S. is currently exporting almost $30 billion of products to Canada per month.

Canada does indeed impose some tariffs on U.S. dairy imports. However, to say that Canada is shutting out U.S. dairy products from its market is untrue. Canada did not change the average tariffs on U.S. dairy imports from Trump’s first term in office through the Biden administration. When the trade war started, dairy products did come under fire. However, the U.S. Department of Agriculture recently reported that Canadian imports of U.S. dairy products have increased by 80% since 2020. Furthermore, it was reported that the U.S. sells double the number of dairy products to Canada as Canada sells to the U.S. This clearly indicates that exports to Canada are not the real reason for the trade war.

Trump seems genuinely agitated and surprised that Canada fights back when he picks a fight with them. Of course, Canada will retaliate — and this seems to trigger Trump to escalate the trade war. Canadians are tired of being bullied and belittled by Trump, and the majority of Canadians do not want Canadian Prime Minister Mark Carney to back down.

Americans are weary of tariffs and their effect on inflation. American businesses are weary of the instability that tariffs today, no tariffs tomorrow, and tariffs again the next day are causing for their business planning and supply chains. For Canadians, the weariness doesn’t seem to have so much to do with tariffs, but rather with the disrespect and bullying that the U.S. has shown this long-standing ally and neighbor since Trump returned to office last year. Canadians have been willing to stop buying U.S.-made products even when no tariff exists. There are currently boycotts in several Canadian provinces preventing the stocking of U.S. liquor. Canadian tourism is steeply down in popular tourist spots such as Miami and Las Vegas, Nevada.

While the U.S. economy is much larger than Canada’s and is poised to withstand a continuing trade war better than Canada, Canadians have an advantage over the U.S. in this spat: resolve. They are voluntarily choosing not to spend their money on U.S. products and entertainment — tariffs or no tariffs. They are encouraging Carney to forge stronger trade relationships with other countries and become less dependent on the U.S. in the future. In this sense, Canada can claim victory for having stood up to the U.S. Needless to say, Canada will probably be revered by other nations who have seen the U.S. impose tariffs on their imports for its actions in a war it didn’t start. Meanwhile, the U.S. will have to figure out a way to end this latest war, since Canada, like Iran, apparently is not backing down.

Jerry Pacheco is the executive director of the nonprofit International Business Accelerator. He can be reached at 575-589-2200 or jerry@nmiba.com.