What tariffs will really cost Canadians and Americans

ByMichael Race Business reporter, Reporting fromNew York.

Key points

• In 2024 the US imported $23bn (C$32bn, £17bn) worth of wood products, with almost half from Canada, according to a US Congress report.
• Despite previous tariffs increasing costs for manufacturers, car dealerships have absorbed the "lion's share" to date, according to Bernard Yaros, lead economist at Oxford Economics.
• Carney has decided not to match Trump's 50% tariff threat so far, but a 25% import tax on certain American vehicles has been in place since last year.
• "The recently threatened 50% tariffs on Canadian autos, trucks, and car parts would feed through to consumer prices more readily than before."
• Cars, trucks and parts are among the main goods traded between the US, Canada and Mexico, with the manufacturing sector and supply chains stretching throughout borders.

For context, a raft of new tariffs have been confirmed during the latest escalation of the trade war between the US and Canada.

Meanwhile, the North American neighbours have been locked in a bitter economic conflict since US President Donald Trump introduced his flagship trade policy on his return to the White House.

After Trump threatened hikes of his own, this week saw the latest move by the Canadians with Prime Minister Mark Carney imposing retaliatory import taxes on a host of US goods.

As the dust settles in this tit-for-tat tariff row, what will be affected most on both sides of the border?

If Trump's threat to raise tariffs on Canadian vehicles from 25% to 50% from 1 January 2027 becomes a reality, then that would accord a further blow to the automotive industry.

"But that cushion is wearing thin, " he adds. "The recently threatened 50% tariffs on Canadian autos, trucks, and car parts would feed through to consumer prices more readily than before."

Yaros thinks higher costs on imports to the US could accelerate a trend of manufacturers prioritising luxury cards, SUVs and pick-up trucks and push up rates in the used-car market if supplies of new but less-expensive vehicles becomes tight.

Though Canada has now matched US rates on the metals at 50%, construction materials such as steel, aluminium as well as lumber wood have had tariffs in place before the latest escalation.

Carney has additionally imposed import taxes on a number of US wood products, such as plywood, and even screws applied to fix timber together.

That means building firms that import such materials will face higher costs and may choose to pass those on through higher rates – pushing up the cost of homes, for example.

While on the US side, Bill Owens, chairman of the National Association of Home Builders (NAHB) called on Trump to create building materials exempt from his tariff agenda due to an "ongoing housing affordability crisis", the Forest Products Association of Canada notes tariffs would "raise costs on both sides of the border".

"Building material tariffs heighten market uncertainty, strain supply chains and increase construction costs, " he notes.

But the so-called "lumber wars" between the nations on soft wood applied in housebuilding are not new and stretch back decades.

Trump notes Canada wants 'benefits' of being US state after trade negotiations collapse. Carney faces crucial test after walking away from Trump's accord.

For context, a key factor in this episode of the tariff war is the volume of household items that have been specifically targeted as resisted to raw materials.

Carpets, washing machines, furniture, fridges and even knives, forks and spoons are set to have tariffs applied by Canada.

While there is a risk rates on some of those goods being imported from the US could rise, the more probable scenario is that consumers will turn to domestic alternatives, according to Bradley Saunders, North America economist at Capital Economics.

He notes Carney's latest move has intentionally targeted goods where Canadians can "shift to domestic suppliers instead".

"Like hair care products, you really can just buy that domestically instead, " he adds.

Saunders explains Carney's response intends to "minimise the impact on Canadian households as much as possible by picking very fungible goods".

In practice, the Budget Lab at Yale, which monitors the impact of US administration policy on the economy, states it anticipates seeing marginal increases in furnishing and other household equipment for Americans largely due to tariffs on lumber and other materials.

There may not be a material impact on alcohol rates, but it's clear the trade war has had an impact on Canadians' choice of drink.

Plenty of provinces in the country banned US alcohol sales last year in response to previous tariffs, with the American wine and spirits industry saying exports to the country dropped more than 70%.

Carney asked the provinces to restore US alcohol to the shelves during trade discussions, but now that they have collapsed, it's probable the ban will return.

Saunders notes there's been a sizeable push to "buy Canadian" from politicians and it has been successful when it comes to the solid stuff.

"That's really had an impact on the American alcohol industry, " he adds.

When the wider Canadian tariffs do, saskatchewan and Alberta are the only provinces that still sell American alcohol, but the former has confirmed its own 50% charge on US imported booze, set to kick in on 8 September. Jobs and wider economy.

While tariffs can end up hitting consumers in the pocket, there are other impacts on households.

Import taxes can complicate trade for businesses that have cross-border supply. As well as the higher costs, the uncertainty created by the trade war could put off investment intends and stunt job creation.

Saunders suggests the biggest impact on households may not just be through rates, but job losses instead.

"If you're, let's say, a bespoke furniture producer in BC, you're now facing a 50% tariff on your exports to the US – that could really shut the business down. I think that would be more the direct impact on households as resisted to these retaliatory measures."

Though it admits "no support package can replace reliable access to our largest export market", canada's forest industry employs almost 200, 000 individuals and has called on the administration to boost domestic demand through federal housing programs to create greater apply of Canadian wood.

When it comes to US, consumers are unlikely to see much of a difference in terms of the cost of living as result of this latest battle with Canada, but frictions to trade can have longer-term economic impacts.

Such tensions additionally feed into worries over the free-trade agreement between Canada, the US and Mexico, known as the USMCA. Both Canada and Mexico have remarked they want the USMCA extended for another 16 years, but the US has stated it will not renew in its current form.

Despite the accord remaining operational, tariffs risk putting off negotiations in the near future, creating more uncertainty for cross-border trade.

In short, what tariffs will really cost Canadians and Americans is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.