How New US-Canada Tariffs Impact Consumers and Businesses in 2024

Tariffs Imposed as US-Canada Trade Tensions Escalate

TORONTO/WASHINGTON — Trade relations between the United States and Canada have further deteriorated after Canadian Prime Minister Mark Carney imposed retaliatory tariffs on a range of American goods in response to threats from US President Donald Trump to increase existing tariffs on Canadian imports.

The latest measures mark another round in an ongoing economic dispute that began after Trump reintroduced his administration’s trade policy upon returning to office. Industry analysts and economists are now assessing the potential economic impact on both sides of the border.

Automotive Sector Faces Further Strain

Trump has threatened to raise tariffs on Canadian vehicles from the current 25 percent to 50 percent by January 1, 2027, a move that would significantly affect the automotive industry. Cars, trucks, and auto parts are among the most traded goods between the US, Canada, and Mexico, with supply chains deeply integrated across North America.

Bernard Yaros, lead economist at Oxford Economics, notes that while manufacturers and dealerships have absorbed previous tariff increases, the cushion against rising costs is diminishing. “The recently threatened 50 percent tariffs on Canadian autos, trucks, and car parts would feed through to consumer prices more readily than before,” he said.

Higher import costs could lead manufacturers to prioritize luxury and larger vehicles, such as SUVs and pickup trucks, while reducing production of less expensive models. This shift could tighten supplies of affordable new vehicles and push up prices in the used-car market.

Canada has not yet matched the 50 percent tariff threat but has maintained a 25 percent import tax on certain American vehicles since last year.

Construction Costs Expected to Rise

Canada has matched US tariffs of 50 percent on steel and aluminum, both critical materials for construction. Additionally, Canada has imposed new import taxes on US wood products, including plywood and screws. These measures will increase costs for construction firms, which may pass those expenses on to consumers, further driving up the price of homes.

The Forest Products Association of Canada warns that tariffs will “raise costs on both sides of the border.” In the US, Bill Owens, chairman of the National Association of Home Builders (NAHB), has urged Trump to exempt building materials from tariffs due to an ongoing housing affordability crisis. “Building material tariffs heighten market uncertainty, strain supply chains and increase construction costs,” Owens stated.

According to a US Congress report, the US imported $23 billion worth of wood products in 2024, nearly half of which came from Canada. The so-called “lumber wars” between the two nations are longstanding, with periodic tariffs disrupting the housing market.

Retaliatory Measures Target Consumer Goods

In a strategic move, Canada has imposed tariffs on a variety of household items, including carpets, washing machines, furniture, refrigerators, and even cutlery. While some of these goods may see price increases, economists suggest Canadians will likely shift to domestic alternatives where possible.

Bradley Saunders, North America economist at Capital Economics, notes that Canada’s tariffs are designed to target goods where domestic supply is readily available. “Carney’s latest move has intentionally targeted goods where Canadians can shift to domestic suppliers instead,” he said. “Like hair care products, you really can just buy that domestically instead.”

The Budget Lab at Yale anticipates only marginal price increases for American consumers, primarily due to higher costs on lumber and other construction materials. However, the cumulative effect of tariffs—including broader trade disputes with China—could result in an average annual cost of about $1,000 per US household.

Alcohol Sector Faces Disruptions

The trade dispute has also affected the alcohol industry. Several Canadian provinces banned the sale of American wine and spirits last year in response to previous tariffs, leading to a more than 70 percent drop in US exports to Canada. While Carney had requested the lifting of these bans during trade talks, their collapse suggests the restrictions may return.

Saunders notes that a “buy Canadian” campaign has had a notable impact on the US alcohol industry. Currently, only Saskatchewan and Alberta continue to sell American alcohol, with Saskatchewan set to impose a 50 percent tariff on US imports beginning September 8.

Broader Economic Concerns

Beyond immediate price increases, tariffs create uncertainty for businesses reliant on cross-border supply chains, potentially deterring investment and job creation. Saunders warns that job losses could be a more direct consequence for households than higher prices.

The forest industry, which employs nearly 200,000 people in Canada, has called for increased domestic demand through federal housing programs. However, the industry acknowledges that no support package can fully replace access to the US market, its largest export destination.

Looking ahead, tensions over the US-Mexico-Canada Agreement (USMCA) add another layer of uncertainty. While Canada and Mexico have pushed for a 16-year extension of the trade deal, the US has indicated it will not renew it in its current form. Existing tariffs could further complicate negotiations, prolonging instability in cross-border trade.

While the direct economic impact of these latest tariffs may be limited for average households, the cumulative effect of ongoing trade disputes raises concerns about long-term economic growth and stability in North America.