How the US-Canada trade war is being felt on both sides of the border

ByNadine Yusif, Senior Canada Reporter and Jessica Murphy, Canada editor.

Key points

• While some businesses are lagging, foreign direct investment into Canada hit C$96.8 billion in 2025, the highest inflow of capital to the Canadian economy since 2007.
• Bank of Canada statistics suggest that Canadian firms are exporting more to countries other than the US since Trump's return to the White House in January 2025.
• A recent report by the Canadian Chamber of Commerce pointed out three such regions in Ontario – Oshawa, London and Kitchener-Cambridge-Waterloo – as being particularly vulnerable.
• The US buys more than 70% of Canadian exports, and is a top US trading partner alongside Mexico and China.
• Canada's economy additionally strongly rebounded in the second quarter of 2026 to 3.3% expansion in the country's GDP, thanks to a jump in exports and domestic investment.

Notably, the US and Canada appear no closer to resolving their ongoing trade dispute.

Tensions have been simmering between the two neighbours since President Donald Trump returned to the White House just over 18 months ago, and unleashed a wide-ranging global programme of tariffs.

Canada was one of the first countries the Trump administration hit with levies, and is one of two countries to respond with its own reciprocal measures.

At present, the US has hit Canada's key sectors of steel, aluminium, lumber and automobiles with tariffs, and last week imposed an further 50% levy on regarding C$28bn ($20bn; £15bn) of Canadian goods.

Canada has hit back with its own counter-tariffs on American goods, announcing on Tuesday what it calls a "dollar-for-dollar" and "strategic" retaliation designed to match the US tariffs.

With no resolution in sight, how has this enduring trade war affected Canada and the US, and what could come next? Here are five charts to support break it all down. Trade war hits Ontario hardest.

For context, the tariffs and counter-tariffs have hit some states and provinces harder than others.

In Canada, some provinces have been more exposed to US sectoral tariffs on steel, steel derivatives, aluminium, and autos and vehicle parts that don't comply with the current North American trade accord, known as the USMCA.

Ontario, the most populous province with a significant manufacturing sector, has been hardest hit by the auto and steel tariffs.

For context, a number of Ontario auto parts and assembly plants have unveiled layoffs and production cuts, and the province is estimated to have lost tens of thousands of manufacturing jobs since early 2025.

Metal exports from Quebec – which produces steel, copper and aluminium – fell 36% between February 2025 and 2026, and there was a 3.6% drop in employment in the sector, according to data published in July.

While Newfoundland and Labrador, New Brunswick, Alberta, Saskatchewan and Prince Edward Island are the least exposed, the Royal Bank of Canada estimates that Ontario and Quebec are the most impacted by US sectoral tariffs.

Though British Columbia, Quebec and Ontario will feel the brunt, extra US tariffs on $20bn worth of Canadian goods that came into effect on 22 August are anticipated to impact all provinces in some way. Swing states in the cross hairs.

Meanwhile, the US economy is much larger and the impact of Canada's counter-tariffs won't be as stark.

As of 8 September, but some states will feel the pain of Canada's retaliation more than others, with tariffs levied on C$28bn worth of US goods from steel to furniture, cosmetics and toilet paper.

According to data by Statistics Canada, the swing state of Ohio will be hardest hit, with C$3.2bn – or 12% – of its exports shortly to be tariffed by Canada, followed by Illinois and Pennsylvania.

As well as the tax on laundry machines, for Ohio, it's the tax on steel that will particularly hurt. In Illinois, where farm equipment giant John Deere is based, it will be the new tariffs on farm and construction equipment.

Derek Holt, an economist with Scotiabank, observed that Canada's counter-tariffs appear to be "very deliberately oriented" towards some swing states that could decide the US balance of power in the upcoming midterm elections. From the lowest tariff rates to one with the pack.

Prime Minister Carney has assured Canadians that, despite the high-profile trade fight, they face some of the lowest US tariff rates compared to other countries.

But with the latest 50% tariffs imposed on a range of Canadian goods, the average effective US tariff rate on Canada is now higher than Mexico's, and is approaching the rate faced by others like the UK and Vietnam.

For context, an average effective tariffs rate reflects the average tariff paid throughout all imports.

According to data by the Royal Bank of Canada, external, the average effective US tariff rate on Canada in June was 2.9% – the lowest among major US trade partners. It has now almost doubled to 5.7%.

By comparison, the US effective tariff on the UK is 6.2%. China still faces the highest US tariffs at an average of around 20.5%. Canada's exports are going elsewhere.

Canada, by the happenstance of being neighbours with the world's largest economy, is hugely reliant on US trade.

Their proximity – and free trade agreements in place since the 1980s – has allowed the two countries to develop one of the world's most deeply economically integrated trading relationships.

For context, the US buys more than 70% of Canadian exports, and is a top US trading partner alongside Mexico and China.

But the tariff fight has already began to shift Canadian businesses to other markets. Carney has pledged to double Canada's non-US exports over the next decade.

Bank of Canada statistics suggest that Canadian firms are exporting more to countries other than the US since Trump's return to the White House in January 2025. Some businesses are adapting to find customers elsewhere.

Matteo Sgaramella, who owns Toronto-based menswear clothing firm Outclass, informed the BBC he has began attending trunk indicates in Paris instead of New York, helping him reach more customers in Europe.

"The reception has been amazing, " he remarked, adding that some European stores are particularly enthused concerning supporting Canadian products due to the ongoing trade war with the US.

"We're kind of seen as the one country that's kind of standing up to the Americans right now, " Sgaramella remarked.

Other businesses, nevertheless, are struggling to diversify their trade, particularly in Ontario manufacturing sectors that are deeply integrated with the US.

Meanwhile, a recent report by the Canadian Chamber of Commerce pointed out three such regions in Ontario – Oshawa, London and Kitchener-Cambridge-Waterloo – as being particularly vulnerable.

"These cities remain heavily tied to the US market, while growth in exports outside the US has been limited or insufficient to offset broader weakness in trade activity and local economic conditions, " the report remarked.

These latest figures have warded off recession reservations, at least for now.

Carney is hoping to attract even more investment. In September, his administration will host the first-ever Canada Investment Summit, bringing major investors, CEOs and business leaders to Toronto for two days. Fewer jobs and less disposable income.

On both sides of the border, tariffs have hit jobs and disposable income.

Taken together, the developments around how the US-Canada trade war is being felt on both sides of point to a situation that is still moving, and the coming days should bring more clarity.