Trump vs Carney: Cars, houses, booze and more caught in the US-Canada tariff war

The trade war between the United States and Canada has escalated, with both countries imposing new tariffs on a variety of goods, including cars, building materials, household products and alcohol. The latest measures come after US President Donald Trump’s threat to raise tariffs on Canadian imports, prompting Prime Minister Mark Carney’s government to announce retaliatory tariffs on several US products.The two American neighbors have been locked in a bitter economic conflict since Trump returned to the White House and launched his signature trade policy. While tariffs could increase costs for businesses and consumers, the impact could also extend to employment, investment and cross-border trade, with the USMCA trade deal between the United States, Canada and Mexico also facing greater uncertainty.

Cars face higher tariffs

Trump has threatened to increase tariffs on Canadian vehicles from 25% to 50% starting January 1, 2027.Cars, trucks and parts are among the top goods traded between the United States, Canada and Mexico, and manufacturing and supply chains extend across borders.Previous tariffs have increased costs for manufacturers, but dealers have absorbed the “most of it”, Bernard Yaros, senior economist at Oxford Economics, told the BBC.“But that mattress is wearing out,” he adds. “The recently threatened 50% tariffs on Canadian cars, trucks and parts would be passed through to consumer prices more easily than before.”Yaros said higher import costs could push manufacturers toward luxury cars, SUVs and pickup trucks, while a shortage of cheaper new vehicles could drive up prices for used cars.Carney has not matched Trump’s 50% tariff threat, but Canada has had a 25% import tax on certain American vehicles since last year.

Building Materials Could Increase Housing Costs

Steel, aluminum and lumber have already faced tariffs, while Canada has now matched US rates on metals at 50%.Carney has also imposed import taxes on American wood products, such as plywood and screws used to join wood.Construction companies could face higher costs and pass them on through higher prices, raising the cost of housing.The Canadian Forest Products Association said the tariffs would “increase costs on both sides of the border.”In the United States, Bill Owens, president of the National Association of Home Builders (NAHB), urged Trump to exempt construction materials due to an “ongoing housing affordability crisis.”“Tariffs on construction materials increase market uncertainty, strain supply chains and increase construction costs,” he says.The United States imported $23 billion worth of wood products in 2024, with nearly half coming from Canada, according to a U.S. Congressional report. Disputes over softwood lumber used in home construction go back decades.

Household items were also attacked

Canada has attacked carpets, washing machines, furniture, refrigerators, knives, forks and spoons.Bradley Saunders, North America economist at Capital Economics, said consumers could turn to domestic alternatives.He said Carney had focused on products where Canadians could “switch to domestic suppliers.”“Like hair care products, you can actually buy them in the country,” he adds, quoted by the BBC.Saunders said the move was intended to “minimize the impact on Canadian households as much as possible by choosing highly fungible products.”Yale’s Budget Lab expects marginal increases in the costs of furniture and other household equipment for Americans, primarily due to tariffs on lumber and other materials.

US alcohol sales face another hit

Several Canadian provinces banned alcohol sales in the United States last year after earlier tariffs, while the U.S. wine and spirits industry said exports to Canada fell more than 70%.Carney had asked provinces to restore American alcohol to their shelves during trade negotiations, but with talks failing, the ban is likely to be reinstated.Saunders said politicians had pushed to “buy Canadian,” which had been successful in the case of spirits.“That has really had an impact on the American alcohol industry,” he adds.Saskatchewan and Alberta are the only provinces that still sell American alcohol. Saskatchewan has announced a 50 per cent charge on alcohol imported from the United States starting September 8, when the broader Canadian tariffs come into effect.

Jobs and economy in general

Tariffs can also affect jobs. Companies with cross-border supply chains face higher costs, while uncertainty could delay investment and limit job creation.Saunders said job losses could have a bigger impact on households than higher prices.“If you are, say, a custom furniture producer in B.C. [British Columbia]It now faces a 50% tariff on its exports to the US, which could really put it out of business. “I think that would be more of a direct impact on households than these retaliatory measures.”Canada’s forestry industry employs nearly 200,000 people and has urged the government to boost domestic demand through federal housing programs to make greater use of Canadian timber. However, he said “no support package can replace reliable access to our largest export market.”For American consumers, the latest dispute in Canada is unlikely to have a major impact on living costs. But trade tensions could create long-term economic effects and uncertainty around the USMCA, the free trade agreement between Canada, the United States and Mexico.Canada and Mexico want the USMCA to be extended for another 16 years, while the United States has said it will not renew it in its current form. Although the agreement remains operational, tariffs could postpone talks.