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Canada is feeling the pain from Trump’s tariffs — but the trade fight didn’t start overnight

Steel exports have plunged and Canadian families are grappling with higher costs as steep US tariffs take their toll

By Amanda Macias
Fox News

Published October 24, 2026 7:00am EDT

Trump’s Canada trade fight hinges on a small but politically powerful slice of trade

Scott Lincicome, vice president of general economics at the Cato Institute, breaks down the politically sensitive dispute complicating one of America’s largest trading relationships.

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President Donald Trump’s escalating trade fight with Canada is squeezing the economy north of the border, threatening jobs and adding to families’ financial strain as steep U.S. tariffs on roughly $20 billion in goods remain in place.

U.S. tariffs have hammered the country’s steel, aluminum, lumber and automobile producers that depend heavily on the American market. Steel exports have fallen by roughly half since the tariffs took effect, while lumber exports were about 20% below 2024 levels earlier this year, according to the Bank of Canada. Production and jobs have also declined in some of the hardest-hit industries.

Canadian families are feeling the squeeze, too. Consumer prices were 3% higher in August than a year earlier, with grocery prices up 2.8% and transportation costs jumping 7.5%, according to the government’s own data.

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The trade fight has escalated under Trump and Canadian Prime Minister Mark Carney, with negotiations breaking down and both countries imposing new measures targeting each other’s goods.(Anna Moneymaker/Getty Images)

Retaliatory tariffs on American products have also added to those costs.

Prices of affected goods, which includes groceries, household products, furniture, electronics and appliances, rose roughly 6% more than comparable products that were not hit by the tariffs, according to the country’s central bank.

But while Canada is feeling the economic pain, the disputes driving Trump’s trade fight are not new.

“The Trump administration is complaining about dairy access and, generally speaking, those complaints are completely valid,” David Clement, North American affairs manager at the Consumer Choice Center, told Fox News Digital.

“Canada has exorbitant tariffs on imports from the United States and really from everywhere around the world when it comes to chicken, turkey, eggs, cheese and milk,” Clement said.

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Clement noted, however, that differences between American and European access to Canada’s market reflect terms negotiated under separate trade agreements, including the USMCA struck during Trump’s first term.

But dairy represents just a fraction of the broader U.S.-Canada trading relationship.

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Softwood lumber has long been a source of trade friction between the United States and Canada, with the two countries clashing over Canadian lumber exports for decades.(Joshua Lott/Bloomberg/Getty Images)

Scott Lincicome, vice president of general economics at the Cato Institute and the Herbert A. Stiefel Center for Trade Policy Studies, said more than 99% of U.S.-Canada trade was duty-free before 2025, with negotiators historically willing to tolerate disputes over politically sensitive products like dairy to preserve the broader relationship.

“The Trump administration has so far refused to make the deal,” he said.

Lincicome said free trade in products including fertilizer, energy and lumber helps keep costs down for American farmers, homebuilders and consumers.

With the midterm elections just weeks away and the cost of living in focus, the trade dispute is unfolding as higher energy prices add another layer of pressure on consumers.

Canadian Prime Minister Mark Carney is confronting a deepening trade dispute with the United States as Trump ramps up tariff pressure.(David Kawai/Bloomberg via Getty Images)

Lincicome called the combination a “double whammy.”

“First you had the tariffs which increased the prices of a lot of products. And then you had energy prices spike because of the Iran war,” he said.

Higher diesel prices can ripple through the economy because they fuel tractors, trucks and trains, Lincicome said, acting “as kind of another tariff” by raising the cost of getting products to consumers.

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Despite the escalating tensions, Clement cautioned against allowing the dispute to undermine the broader relationship.

“The partnership between Canada and the United States is one of the greatest trading relationships the world has ever known,” he said. “That should be embraced. It should be enhanced, and it shouldn’t be torn down by either side.”

Amanda Macias covers the intersection of business, economics and politics, with a focus on how policy decisions shape markets, businesses and American workers.