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Which sectors are being hit by the new tariffs?

The U.S.-Canada trade war has deepened after Donald Trump returned to the White House in January 2025 and launched a broad tariff program. The U.S. has imposed duties on key Canadian industries including steel, aluminum, lumber and autos, and last week added another 50% tariff on roughly CAD 28 billion worth of Canadian goods. Ottawa on Tuesday announced new retaliatory measures with a “dollar-for-dollar” approach to match the U.S. tariffs.

Ontario and Quebec face the biggest pressure in Canada

In Canada, Ontario is feeling the sharpest impact thanks to its large manufacturing base. The province’s many auto parts and assembly plants have announced layoffs and production cuts, and tens of thousands of manufacturing jobs are estimated to have been lost since the start of 2025. In Quebec, metal exports fell 36% between February 2025 and 2026, while employment in the sector declined 3.6%.

According to Royal Bank of Canada data, Ontario and Quebec are the provinces most exposed to U.S. sector-specific tariffs. Newfoundland and Labrador, New Brunswick, Alberta, Saskatchewan and Prince Edward Island face relatively lower risk. Additional U.S. tariffs that took effect on 22 August are expected to affect all provinces, with the heaviest burden likely to fall on British Columbia, Quebec and Ontario.

Ohio, Illinois and Pennsylvania stand out on the U.S. side

Although the U.S. economy is much larger, Canada’s retaliatory tariffs will create clear pressure in some states. Starting 8 September, tariffs will be applied to CAD 28 billion worth of U.S. goods, from steel and furniture to cosmetics and toilet paper. Statistics Canada data show Ohio will be the most exposed state to Canadian tariffs, with CAD 3.2 billion in goods affected, followed by Illinois and Pennsylvania.

How are effective tax rates and trade flows changing?

Prime Minister Mark Carney argues Canada still faces lower U.S. tariffs than many other countries, but the latest increases have changed that picture. According to Royal Bank of Canada, the average effective tariff rate the U.S. applies to Canada has nearly doubled, rising from 2.9% in June to 5.7%. That puts it above Mexico’s rate and close to the 6.2% calculated for the United Kingdom.

More than 70% of Canadian exports go to the U.S. However, Bank of Canada data show companies have been shifting more exports to markets outside the U.S. since Trump’s return. Carney’s government has also set a goal of doubling non-U.S. exports over the next decade.

  • Foreign direct investment in Canada reached CAD 96.8 billion in 2025, the highest level since 2007.
  • The Canadian economy grew 3.3% in the second quarter of 2026, supported by higher exports and domestic investment.

What is the impact on jobs and prices?

The most visible result of the tariff fight is showing up in employment. Bank of Canada data show that about 55,000 manufacturing jobs were lost in Canada between January 2025 and January 2026. Calgary-based economist Trevor Tombe estimates total job losses nationwide could reach 90,000 if the new U.S. tariffs become permanent.

Cost pressures are also rising in the U.S. The Center for American Progress says Trump’s tariffs on multiple trading partners have affected tens of thousands of jobs in manufacturing, transportation and warehousing, while the Tax Foundation estimates a typical U.S. household could pay an average of $840 more this year because of tariffs. Canada’s more targeted retaliation is intended to limit the impact on consumers, but economists warn that higher prices for industrial inputs imported from the U.S. could still push up production costs.

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