"Strategy debates among pros: Trump's tariffs and future trade policies"
As of August 2025, trade negotiations between Canada and the United States remain in a tense and unresolved state, with increased tariffs significantly impacting Canadian exports. The U.S. raised tariffs on Canadian imports from 25% to 35% on August 1, 2025, after Canada failed to secure a new trade deal before the deadline.
The key sectors affected include steel and aluminum, automotive, and softwood lumber. The steel and aluminum industries have been subject to 25% tariffs since March 2025, with the U.S. moving to 50% tariffs under Section 232 (national security), severely hindering these industries and disrupting supply chains. The automotive sector faces 25% tariffs on non-USMCA compliant vehicles and parts, threatening manufacturing competitiveness and jobs, while anti-dumping duties on softwood lumber have nearly tripled, risking mill closures and job losses.
Canada has responded by imposing reciprocal tariffs, notably 25% on U.S.-imported vehicles, and established a $2 billion strategic fund to support the automotive sector, focusing on boosting competitiveness, job protection, worker training, and domestic supply chains.
Negotiations are currently in an "intense phase," led by U.S. agencies including the Treasury and USTR, but no breakthrough has been publicly announced. The U.S. administration is also reportedly considering a move from the USMCA free-trade agreement toward a customs union, which would require Canada and Mexico to align tariffs with the U.S. on all third countries, potentially forcing Canada into difficult trade policy adjustments.
The overall outlook remains uncertain, hinging on ongoing high-stakes negotiations. Canada seeks to preserve its low effective tariff rates under USMCA exemptions, while the U.S. under President Trump continues to use tariffs as leverage to address what it views as trade irritants, including supply management and third-country tariff circumvention.
In the meantime, many within the Canadian business community had been hoping for a new trade deal before last week's deadline, but an imminent agreement is unclear. Many of Canada's economic partnerships are still in the early stages, and Prime Minister Mark Carney has emphasized the need for Canada to diversify its economic partnerships and become less dependent on the U.S.
John Boscariol, leader of the International Trade and Investment Law Group at McCarthy-Tétrault LLP, anticipates a resolution over sectoral tariffs as part of the ongoing trade negotiations. He also notes that while there is an opportunity to diversify, most Canadian exporters will continue to rely on U.S. markets in the near and medium term.
Professor Drew Fagan, a professor at the Munk School of Global Affairs & Public Policy, suggests that the bigger negotiation for Canada is the renewal, review, and renegotiation of the Canada-United States-Mexico agreement (CUSMA) in 2022. He warns that there could be a "full tilt" in 2026 regarding the CUSMA renegotiation.
Trump's legal justification for the tariffs on Canadian goods comes from the International Emergency Economic Powers Act (IEEPA). A significant court case is ongoing to challenge the tariffs, but the outcome is uncertain.
In conclusion, the trade tensions between Canada and the U.S. continue to impact key industries and the overall economy. The negotiations are ongoing, and both countries will need to make significant concessions or compromises to address the tariffs and restore more stable trade relations.
- The ongoing trade negotiations between Canada and the United States, particularly the tariffs on Canadian imports, are significantly impacting the economy, key industries such as steel, automotive, and softwood lumber, and the business community.
- The U.S. administration is considering a move from the USMCA free-trade agreement toward a customs union, which could force Canada into difficult trade policy adjustments and potential trade disagreements.
- Canada has responded to the tariffs by imposing reciprocal tariffs, establishing a strategic fund to support the automotive sector, and focusing on diversifying its economic partnerships to reduce dependency on the U.S.
- The overall outlook remains uncertain, with ongoing high-stakes negotiations and potential legal challenges to the tariffs. The renewal, review, and renegotiation of the Canada-United States-Mexico agreement (CUSMA) in 2022 could be a significant negotiation for Canada.
