It's tariff time in America and Canada — again.
On Saturday, after trade talks between Canada and the US collapsed, the Trump administration imposed 50% tariffs on a slew of Canadian items, including alcohol and hockey equipment. Canadian Prime Minister Mark Carney has already announced a dollar-for-dollar counter-tariff, marking yet another bumpy moment in tensions between the two formerly friendly neighbors.
The specificity of the tariffs means that different sectors of the economy — and your everyday purchases — will get hit unevenly. The tariffs affect alcohol, milk, plywood, and more. For consumers craving Canadian whisky or finally getting around to home renovations, that might mean a bigger bite out of their wallets.
Census Bureau data showed that paper and paper products alone accounted for $3.3 billion of the roughly $382 billion in goods imported from Canada to the US last year. On top of Saturday's announcement, President Donald Trump wrote on Truth Social on Monday that tariffs on cars, trucks, automotive parts, and steel from Canada will rise to 50% in January 2027. Passenger cars accounted for about $25 billion of imported goods last year.
Debbie Safran, the owner of Houndstooth Pet Boutique in Burlington, Vermont — which is situated about 45 miles away from the Canadian border — said she's worried about a shipment of her favorite winter coats for dogs.
"We've spent years building up and getting a client base for it because we love it so much. They're made by a woman-owned business in Canada," Safran said. "I've already placed my order for this season, and they haven't arrived yet. So when they arrive, I'm going to get stuck with a massive tax bill, and I'm not happy."
What it means for the American economy
Saturday's tariffs are likely to fall heavily on the sectors directly named, and on states like Michigan that rely heavily on cross-border trade. However, their limited scope makes them unlikely to significantly affect broader American employment. Any upward pressure on inflation from the tariffs might also contribute to ongoing interest rate discussions.
"While it won't be a big macro employment impact, it will have big, big impacts in these sectors that are hit particularly hard," said Erica York, a senior economist at the Tax Foundation.
Inflation rates are already stubbornly high due to recent supply shocks — geopolitical tensions, the pandemic, and the last rounds of Trump's tariffs. The newest tariffs could present yet another shock. Inflation cooled to 3.4% in July, still above the Fed's 2% target. The trend has contributed to higher interest rates, and the Federal Reserve is likely to hike rates at least once in 2026, per the central bank's most recent economic projections. Kevin Warsh, the Fed's new chair, has a reputation for being hawkish on inflation.
While a single rate decision doesn't directly impact consumers, Americans may feel a ripple effect. A pattern of hikes would drive up mortgage rates, making it more expensive to both buy and rent a home.
Canada is also a major supplier of lumber, a key material in homebuilding. A tariff impacting lumber prices would increase construction costs for new homes, just as cities like New York, Austin, and Raleigh, North Carolina, double down on policies to boost housing supply.
Home prices are already out of reach for many lower- and middle-income households, with expensive houses sitting empty while buyers scramble for a limited number of affordable listings. And because the US has far less publicly owned forest land than Canada, it will be difficult to fill the gaps with domestic supply.
Border states could also feel the heat of new tariffs in their beacon industries, including in Michigan's large auto industry.
"Tariffs may have hit Michigan harder than almost any other state. Building a car means moving parts across the U.S.-Canada border multiple times," an Instagram post from Michigan Gov. Gretchen Whitmer said. "Now, Michiganders are paying the price, with higher costs for everything from cars and gas to groceries."
Olu Sonola, head of US Economics at Fitch Ratings, said the higher autos and parts tariffs could mean an "additional tariff burden" of up to $5 billion.
"January is still several months away, leaving room for negotiation, but the uncertainty alone will strain the highly integrated North American auto supply chain," Sonola said.
Across the border, the situation might be more grim. Trevor Tombe, an economics professor at the University of Calgary, found that nearly 90,000 Canadian jobs, including in various manufacturing sectors, could be affected.
"Those losses go beyond where the tariffs directly land. Alberta is a good example: its exports are barely affected by the new tariffs, yet I estimate roughly 9,000 jobs there are at risk," Tombe wrote.
Of course, tariffs landing now don't mean they'll stick around. Trump's persistent efforts to raise levies — or threaten them — have been walked back or struck down before, and that might end up being the case for this latest round. But if these stay in effect, they might continue to erode the once-friendly, neighborly relationship.
"Naturally, the way the trade kind of flows, it's easier for Canada to trade with us and us to trade with Canada just because we're so close to each other," said Bob Schwartz, the sales and marketing director at the Vermont-based von Trapp Family Lodge and Resort, which sits around 45 miles away from the Canadian border. "It's very difficult when these things happen because it kind of throws a wrench in everybody's business plans."
Will the tariffs impact your business or spending habits? Contact these reporters at [email protected], [email protected], and [email protected].
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Madison Hoff is a reporter on Business Insider’s economy team. She covers the labor market, inflation, spending, and other data. In addition to covering new estimates and trends, her workforce reporting includes career pivots, job searching, and side hustles.She also covers downsizing, particularly people selling their houses to pursue RV living. She has also reported on how much teachers spend out of pocket and what it’s like being a caregiver.Her stories often cover the state of the economy, what experts are saying, and how people are navigating the workplace or their careers.Previously, she was a junior reporter and data editorial fellow on the Strategy team.
Allie Kelly is a reporter on Business Insider’s economy team, where she covers housing and affordability in America’s biggest cities. Her latest project — called “Cost of the City” — is an ongoing deep dive into Mayor Zohran Mamdani’s agenda and life in New York. Allie previously worked on a yearlong investigation into the impact of rising cancer cases on young adults, and a series about retirees' reflections on money and loneliness. She also covers the Federal Reserve.Allie is a frequent guest on various TV and radio programs and a contributor to Business Insider’s Big Business and quicksplainer video series.Before joining Business Insider, Allie covered breaking news at The Dallas Morning News and wrote and edited for The Trace. She is an alum of The University of North Carolina at Chapel Hill.
