The United States and Canada remain locked in a trade dispute that has intensified since President Donald Trump's return to the White House in January 2025, with both sides imposing tariffs on key sectors and goods.

The United States first applied tariffs to Canada’s steel, aluminium, lumber and automobile sectors, and last week added a 50 percent levy on about C$28 billion of Canadian goods. Canada responded with reciprocal tariffs on C$28 billion of U.S. products, describing the measures as “dollar‑for‑dollar” and “strategic” retaliation.

Ontario, the most populous province and a manufacturing hub, has seen layoffs and production cuts in auto parts and assembly plants, with tens of thousands of manufacturing jobs lost since early 2025. Quebec reported a 36 percent decline in metal exports between February 2025 and 2026 and a 3.6 percent drop in sector employment. The Royal Bank of Canada estimates that Ontario and Quebec are the regions most exposed to sectoral tariffs, while the Atlantic provinces and the western provinces are less affected.

Canada’s counter‑tariffs target C$28 billion of U.S. goods, including steel, furniture, cosmetics and toilet paper, and have hit swing states such as Ohio, Illinois and Pennsylvania hardest. Ohio faces C$3.2 billion in tariffs, or 12 percent of its exports, with steel and laundry machines among the affected products. Illinois sees tariffs on farm and construction equipment, while Derek Holt of Scotiabank noted that the measures appear aimed at influencing the upcoming midterm elections.

The average effective U.S. tariff rate on Canada rose from 2.9 percent in June to 5.7 percent, surpassing the rate on the United Kingdom and approaching that on the UK. Canada’s exports to non‑U.S. markets have increased since January 2025, and the government has pledged to double non‑U.S. exports over the next decade. Outclass owner Matteo Sgaramella said the reception in Europe has been strong, and some European stores are particularly enthused about supporting Canadian products. The Canadian Chamber of Commerce identified Oshawa, London and Kitchener‑Cambridge‑Waterloo as particularly vulnerable regions where export diversification is limited.

Foreign direct investment into Canada reached C$96.8 billion in 2025, the highest inflow since 2007. The economy grew 3.3 percent in the second quarter of 2026, driven by export gains and domestic investment, which has temporarily eased recession concerns. The government plans to host the first Canada Investment Summit in Toronto in September to attract further capital.

An analysis by the Canadian American Business Council estimates that failure to preserve the USMCA could eliminate tens of thousands of manufacturing jobs. Bank of Canada data show 55,000 manufacturing jobs lost in Canada from January 2025 to January 2026. If the new 50 percent tariffs persist, economist Trevor Tombe estimates total Canadian job losses could reach 90,000. In the United States, the Center for American Progress estimates tens of thousands of jobs have been lost in manufacturing, transportation and warehousing since the “Liberation Day” tariffs were imposed. The Tax Foundation estimates that the average American household could face about $840 higher costs this year due to tariffs on imports, including Canadian goods. Economists note that while Canada’s counter‑tariffs are targeted, manufacturers will face higher input costs.

The trade dispute remains unresolved, and the impact on jobs, prices and investment continues to evolve.