US-Canada Tariff War: Economic Impact

Updated: 2026-06-17｜Tariff rates, policies, schedules and other volatile information should still be confirmed against official announcements

The US-Canada tariff war has run into 2026, and it is no longer a breaking-news headline but a real weight pressing down on Canada’s economy and ordinary households. For people living, working, or considering a move to Canada, the impact is actually closer than you might think—it affects prices, job opportunities, and even the difference in economic conditions from province to province. This piece uses my own observations from continuously tracking official sources and financial reporting to lay out the current situation and its real impact on daily life.

Let’s start with the latest tariff structure, because it has changed a lot this year. On February 20, 2026, the US Supreme Court ruled that part of the tariffs levied under the International Emergency Economic Powers Act (IEEPA) were unlawful; starting February 24, US Customs stopped charging the original 35% tariff on Canadian goods that do not comply with CUSMA (the US-Mexico-Canada Agreement), replacing it with a single 10% global tariff, while goods meeting CUSMA’s rules of origin remain exempt. But take special note: steel, aluminum, copper, certain auto parts, lumber and wood products are taxed separately under Section 232 of the US Trade Expansion Act, and they were not removed by the adjustments above—the high tariffs on these industries are still in place.

Beyond the rate figures, what really makes an impact is the drag on Canada’s overall economy. Economists estimate that this round of the tariff cycle in 2025 to 2026 has already reduced Canada’s GDP by roughly 1.5% to 2%, and the average Canadian household has to absorb about an extra CAD 1,700 to 2,000 in costs per year. The hardest hit is manufacturing that depends heavily on exports to the US—exports of automobiles and parts, steel and aluminum products, and downstream forestry products remained weak through the first two months of 2026. Because these industries are concentrated in Ontario and Quebec, the 2026 economic growth outlook for these two provinces also falls toward the back of the pack among all provinces.

Another variable that has not yet materialized but poses a major threat is Trump’s January 2026 warning: if Canada finalizes a trade agreement with China, the US side could impose a 100% tariff on all Canadian imports. Given that Canada is one of the main suppliers of crude oil, natural gas and auto parts to the US, if a tariff of this scale were to become reality, energy and auto prices would rise immediately, potentially pushing inflation up by an estimated 1.5% to 2% in the short term. This is also why Canadian Prime Minister Carney has repeatedly stressed the need to “reduce dependence on the US” and diversify export markets—but in the short term, growth in non-US markets still cannot make up for the loss of US demand.

Facing the pressure, the countermeasures and adjustments by the federal and provincial governments are also worth knowing. In addition to imposing retaliatory tariffs on US goods, several provinces have at times pulled US-produced spirits from shelves as a boycott, and the federal and provincial governments have also promoted “Buy Canada” procurement policies. For ordinary consumers, this means that the mix and prices of products you see in supermarkets and liquor stores will continue to be fine-tuned over the next year or two. The truly key moment is the CUSMA joint review on July 1, 2026—this is the formal review at the agreement’s sixth anniversary, where the three governments must each state in writing whether they support extending the agreement for another 16 years (to 2042). But a reminder: the Section 232 tariffs on steel and aluminum, automobiles, copper and lumber actually fall outside the CUSMA review framework and must be handled through separate channels, so even if the July review goes smoothly, the tariffs on these industries will not automatically disappear.

If you are a reader planning to relocate, or already living in Canada, my advice is very practical: treat the tariff war as a background condition that “will continue to affect prices and employment,” rather than a single event that will suddenly end one day. For everyday shopping, keep an eye out for local and non-US imported alternatives, and for job hunting and buying property, factor in the economic volatility of manufacturing hubs such as Ontario and Quebec. For more complete preparation on living, spending and adapting, you can also refer to our Canada Living Guide; and if you are still at the entry or visa stage, the Canada Visa and Entry Guide can help you sort out the process first. Tariff policy changes fast, so before making any decisions please be sure to cross-check the rates and dates in this article once more against the Canadian government’s official announcements (Canada.ca) and the latest information from the Department of Finance.