Impact of New U.S. Tariffs on Canada Expected to Hit Border States Hard

With new U.S. tariffs targeting Canada scheduled to commence on Wednesday, states along the border like Minnesota, New York, Vermont, and Washington may face severe economic challenges. President Donald Trump shows no intention of delaying or canceling these tariffs.

On July 20, the Trump administration utilized section 338 of the Tariff Act of 1930, instating 50 percent tariffs on around $20 billion of Canadian exports. This includes items such as hockey sticks, clothing, wines, some dairy products, and building materials, including cement and plywood. Energy, potash, fish, and critical minerals will avoid these tariffs. The White House describes this move as a response to what it sees as Canada’s unfair treatment of American goods, specifically alcohol, dairy, and automotive exports.

Despite negotiations between Washington and Ottawa, the Canadian Broadcasting Corporation (CBC) reported on Monday that progress was stalled, raising expectations for tariffs to proceed. Canada’s Prime Minister Mark Carney, after a phone call with Trump, stated that talks are in a “delicate” and “intense” phase, implying that stopping the tariffs appears unlikely.

“As we approach this week’s deadline, we encourage U.S. and Canadian officials to engage in constructive dialogue to address areas of concern and avoid new tariffs.”

The U.S. Chamber of Commerce is also urging resolution, warning of economic damage. Neil Herrington, senior vice president for the Americas, urged continued dialogue, highlighting the economic risks to both countries, including disruption to critical supply chains and threats to jobs under the U.S.-Mexico-Canada Trade Agreement.

The tariffs are particularly concerning for U.S. border states. Research from Cornell and Ohio State Universities show that trade conflicts impact states with strong economic ties to affected nations more severely. For example, states like Michigan and North Dakota, with substantial trade in processed foods and livestock with Canada, face increased vulnerabilities. The New York State Comptroller’s office previously reported negative impacts from tariffs on tourism and exports to Canada. Tourism dropped by more than 21 percent, with nearly 3.6 million fewer visitors.

Increased tariffs on Canadian goods like plywood and lumber would raise product costs, impacting local businesses in northern New York. This may lead to price increases for consumers, warned a building supplier relying on Canadian inventory, as reported by WAMC.

If tariffs proceed, they could ripple throughout the U.S. economy. The Chicago Fed notes that tariffs affect 569 product categories, adding layers of costs over existing tariffs and customs fees. Consumers might bear these increased costs, exacerbating current consumer price increases.

Efforts continue to prevent these tariffs. Canada-U.S. Trade Minister Dominic LeBlanc and Janice Charette are striving for an agreement with Washington. However, it is uncertain if reconciliation is possible. The U.S. demands Canada lift retaliatory tariffs on American autos, adjust dairy quotas, and allow U.S. alcohol sales, points complicated by provincial control in Canada.

Conversely, Canada seeks tariff reductions on its steel, aluminum, automotive, and lumber sectors. Balancing concessions is complex for both nations, particularly Canada, as current sentiment there opposes new tariffs, with 79 percent holding unfavorable views toward Trump, according to Angus Reid Institute.