It is always difficult to determine why a trade war begins, and Trump’s trade war is no exception. He has argued, at different times, that it all about repatriating manufacturing plants to the American heartland; that it is about countering unfair trade practices in its major competitors; that it is about establishing greater bargaining strength on non-trade issues such as illegal immigration; and/or that it is about restoring US supremacy in world trade. Take your pick. 

Canada remains the US second largest trading partner and this trade will have implications on both sides of the border. This note deals with how vital Canadian exports are to the strength of the US economy.

Trump has announced a frontal attack on Canada, setting out 25% tariffs on all non-energy imports from Canada. Oil and gas imports will be subject to a smaller 10% US tariff. Given that the Canadian dollar has depreciated nearly 7% since the fall of 2024, this tariff on energy trade will not have much impact  at US gasoline pumps. But what about the wider range of Canadian exports that will be affected? Let’s look at how some key US imports will be impacted by US tariffs.

Canadian Lumber Exports. Canada is one of the world’s largest producers and exporters of softwood lumber and a major supplier to the US homebuilding industry. Upwards of 30% of softwood lumber consumed in the U.S. each year comes from Canada. Moreover, the U.S. is unable to meet demand from its own forestry industry. Homebuilders are left no choice but to pass the higher costs to their customers.

Canadian Aluminum Exports. The U.S. is the world’s largest importer of raw aluminium, reaching US$ 1 billion in 2024. Canada accounted for 75 % of all US aluminium imports. The advantage of  cheap electricity and easy market access, allows Canada to main this relative strong position. Putting tariffs on aluminum imports will just push up the cost of finished products, especially in the US auto industry.  

Canadian Mineral Exports. Simply put, Canada remains the biggest source of US mineral imports, such as uranium, nickel, steel copper, and aluminium. Currently, the U.S. buys nearly $50 billion in mining products which are mostly headed for the defense, nuclear energy and heavy manufacturing industries. All these minerals are critical to the well-being of the US economy and its national security apparatus. Uranium serves as an example of how dangerous tariffs remain for US security interests, given that Russia and China dominate the world’s uranium enrichment capability.

Canadian Automotive Exports. Without question, the most complex and worrisome aspect of a North American trade war concerns the application of tariffs on auto parts as they crisscross the border numerous times. The North American auto industry is the most highly integrated industry in the region and represents just how vulnerable that industry is to an across-the-board tariff structure. The industry accounts for more than 10% of total regional trade and that equates to hundreds of billions of dollars in manufacturing activity throughout. No wonder industry executives are worried about declining sales and rising costs that would likely ensue.

So, Trump has the trade war he wanted badly. But he will have to face up to the consequences of tariffs affecting so much of the US economy. Expect the political backlash to be on its way, since far too much more is at stake than what Trump’s loyalists believe.

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