US and Canada escalate tariff standoff, new levies hit key industries

The United States and Canada remain locked in a widening trade dispute as the US imposed an additional 50% tariff on about C$28bn of Canadian goods and Canada announced reciprocal, dollar-for-dollar counter-tariffs, officials confirmed, deepening economic strain across several provinces and US states.

The latest US measures target Canadian steel, aluminium, lumber and autos, among other products, while Ottawa responded with strategic tariffs on a range of American goods including steel, furniture, cosmetics and household items. Canada’s retaliation covers C$28bn of US exports as of 8 September, aiming to mirror the US levies.

Ontario has been the hardest hit Canadian province due to its concentrated manufacturing and auto sectors, with tens of thousands of manufacturing jobs lost between January 2025 and January 2026 according to Bank of Canada figures. Quebec’s metals sector saw metal exports fall 36% between February 2025 and 2026 and experienced a 3.6% drop in sector employment, data released in July show.

In the United States, some swing states face notable exposure: Ohio stands to lose C$3.2bn of exports to Canadian tariffs, representing 12% of the state’s affected exports, followed by Illinois and Pennsylvania, based on Statistics Canada data. Specific sectors targeted include steel and laundry machines in Ohio and farm and construction equipment in Illinois.

Economic indicators show the average effective US tariff on Canada rose from 2.9% in June to about 5.7% after the new measures, placing it above Mexico’s rate and approaching tariffs faced by partners such as the UK. China continues to face the highest US average effective tariff at around 20.5%, according to Royal Bank of Canada and related analyses.

Canadian exporters are shifting toward markets beyond the US, with Bank of Canada statistics indicating increased non-US exports since January 2025. Prime Minister Carney has pledged to double non-US exports over the next decade, and foreign direct investment into Canada reached C$96.8 billion in 2025, the highest inflow since 2007.

Liberal News Analysis: What Does This Development Mean?

The tariffs and counter-tariffs have concentrated impacts described in official data: Ontario and Quebec show the largest exposure among provinces; Ohio, Illinois and Pennsylvania are among the most affected US states; the average effective US tariff on Canada has risen to roughly 5.7%; Canadian firms are diversifying exports away from the US; and employment losses in affected manufacturing sectors total about 55,000 from January 2025 to January 2026 with estimates of up to 90,000 potential job losses if higher tariffs persist, according to cited economists and institutions.

Quick Glance: What You Need to Know

• US imposed a 50% tariff on about C$28bn of Canadian goods, affecting steel, aluminium, lumber and autos.
• Canada retaliated with dollar-for-dollar tariffs on C$28bn of US goods, including steel and consumer items.
• Ontario and Quebec are the most exposed Canadian provinces; Ohio, Illinois and Pennsylvania are among the US states hardest hit.