Politics
As Trade Tensions Rise With Canada, American Businesses and International Credibility Stand to Suffer
Trade tensions between the U.S. and Canada are escalating after Canada announced $20 billion in tariffs on more than 700 U.S. goods, including steel, aluminum and dairy products.
The retaliatory tariffs will take effect Sept. 8 and are a response to U.S. tariffs imposed Aug. 22 on Canadian wine, cement and hockey sticks, among other products.
“President Trump is taking action to hold Canada accountable for its continued discrimination against and unreasonable and unequal treatment of U.S. commerce that has burdened and disadvantaged hardworking Americans,” the White House wrote in a fact sheet announcing the tariffs.
While the tariffs are expected to create uncertainty for businesses on both sides of the border, experts say the broader consequence could be a major shift in U.S. trade relations.
Robert Gulotty, a political science professor at the University of Chicago, said that if Canada can withstand American pressure, it could change how other countries negotiate with the U.S.
“The Canadian government is trying to test the proposition that it’s possible to withstand a fight with the United States,” Gulotty said. “Mark Carney laid out the standard that he expects countries to play when negotiating with the United States, and that is to take a hard fight rather than just acceding to American demands.”
President Donald Trump has made tariffs a cornerstone of his economic policy since returning to office 17 months ago. On April 2, 2025, he announced sweeping “Liberation Day” tariffs on about 90 countries, arguing they would put the U.S. on equal footing after years of what he called unfair trade practices.
A year later, the White House claimed victory, arguing the Liberation Day tariffs helped secure beneficial new deals.
“The results since Liberation Day have been astonishing: over 20 new trade deals, trillions in manufacturing investments, lower drug prices, and lower goods trade deficits,” White House spokesperson Kush Desai said in a statement.
Trump has tried the same method with Canada, accusing the country of “ripping off the United States for decades.”
But Gulotty said the president’s adversarial approach to trade policy could backfire if Canada doesn’t back down.
“The goal here from the Trump administration is to use the leverage the U.S. has to extract more concessions from Canada, and most countries have played ball,” Gulotty said. “(Canada) says, ‘We have to challenge the United States.’ This recent round of conflict is an example of Canada putting its money where its mouth is. It’s trying to enact a pressure campaign by not just backing down.”
Ian Hurd, a political science professor at Northwestern University, said there’s no merit to the idea that Canada is ripping off the United States.
“The import-export trade between the U.S. and Canada is about businesses making business deals with other companies in order to advance the interests of their companies,” Hurd said. “That’s what drives imports and exports, so the concept of taking advantage is ludicrous.”
U.S. and Canadian officials met in August before the initial U.S. tariffs took effect to negotiate a deal that would have avoided an escalation. That deal ultimately fell apart with both countries pointing the finger at the other.
But Hurd said most of the blame for negotiations collapsing can be placed on the U.S.
“I think what we’re seeing is that the world of international diplomacy has grown tired of Trump’s show,” Hurd said. “I’m not sure there are many international negotiators that trust what comes out of the White House. So when they sit down to talk to each other, there’s no sense that the Americans are likely to live up to any of their promises. That makes it basically impossible to have a negotiation because there’s no faith that a deal will be upheld by the Americans. That’s a real change in how the Americans are seen.”
On top of potentially degrading international credibility, igniting a trade war with Canada could hamper businesses.
Mark Denzler, president and CEO of the Illinois Manufacturers Association, said the U.S. tariffs on Canada will cripple companies that rely on Canadian goods.“American manufacturers, Illinois manufacturers, just want certainty,” Denzler said. “The ping-pong ball back and forth really creates an issue for businesses that are trying to plan not only next year but five and 10 years down the road.”
In 2025, Canada was Illinois’ largest export market by a wide margin. Illinois exported $80 billion worth of goods, $17.5 billion of which went to Canada. Canadian retaliatory tariffs are expected to hit popular industries in the state like manufacturing and farming.
“For American manufacturers that maybe have one supplier in Canada, that cost is going to go up exponentially under these tariffs,” Denzler said. “Those costs are going to be passed on to consumers in most cases, or the company can’t provide a higher wage to its employees or buy that new piece of equipment.”
