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American consumers and businesses already facing elevated prices could come under further pressure as trade tensions between the United States and Canada escalate, the New York Times reports.
On August 22, new 50% U.S. tariffs on about $20 billion worth of Canadian goods took effect after trade talks between Washington and Ottawa collapsed. Canadian Prime Minister Mark Carney responded by announcing reciprocal tariffs on U.S. products starting September 8.
The new U.S. tariffs cover products including wine, furniture, dairy goods, cement, clothing, fishing equipment and hockey gear. They apply to roughly 5% of Canada’s exports to the United States, limiting their immediate economy-wide impact but increasing the risk of further escalation.
Economists warn that another round of retaliatory measures could push up prices, discourage investment and weaken economic activity on both sides of the border.
“The biggest problem is uncertainty,” said Scott Lincicome of the Cato Institute, noting that shifting U.S. tariff policies have already created volatility for financial markets and increased pressure on consumer prices.
Canada prepares retaliation
Carney said Canada would respond “dollar for dollar,” targeting sectors including steel, electronics and dairy. The Canadian measures are due to take effect on September 8.
The latest dispute also threatens the future of the U.S.-Mexico-Canada Agreement (USMCA). The new American tariffs do not provide exemptions for Canadian goods covered by the trade pact, further complicating negotiations over its future.
The escalating dispute could particularly affect industries with deeply integrated North American supply chains, including automotive manufacturing.
Economists also warn that higher import costs could complicate the Federal Reserve’s fight against inflation. The risk comes as the U.S. economy is already facing pressure from higher government debt and elevated energy costs.
Trump could still seek a deal with Canada, but U.S. Trade Representative Jamieson Greer said no new negotiations are currently scheduled. Canada, meanwhile, has suspended further trade talks following the collapse of the latest negotiations.
