Trump’s Trade War with Canada Backfired on America

Trump’s Trade War with Canada Backfired on America

How tariffs intended to protect U.S. industry ended up hurting American businesses and straining a key alliance

By Sujon

The tariffs on Canadian steel and aluminum, imposed under the pretext of national security, were intended to reignite U.S. manufacturing, curb foreign dependency, and bolster American jobs when former President Donald Trump launched a trade war with Canada in 2018.

However, the legacy of that trade war tells a different story—one in which U.S. businesses absorbed higher costs, export markets shrank, and North America's tightly integrated economies were thrown into disruption.

The Spark That Lit the Fire

Trump's use of Section 232 of the Trade Expansion Act, which permitted tariffs on imported steel (25%) and aluminum (10%) from important allies, including Canada, was at the center of the conflict. Despite strong opposition, the administration proceeded, citing national security risks, a claim that is widely contested by policymakers and economists.

Canada promptly retaliated with dollar-for-dollar countermeasures on American commodities like lawn mowers, bourbon, and orange juice. Canada is the United States' top supplier of both materials and its second-largest trading partner overall. Both nations' businesses were shaken by the tit-for-tat escalations, which were widely criticized.

Collateral Damage: American Business

Rather than reviving American steel production or creating a wave of new jobs, the tariffs triggered a cascade of negative effects. U.S. manufacturers, particularly those reliant on Canadian metal—such as automotive, construction, and machinery firms—faced soaring input costs. This eroded profit margins and led some companies to delay investments or downsize.

“Instead of punishing foreign producers, we ended up harming ourselves,” said one executive at a U.S.-based manufacturing firm. “The increasing costs made it harder to compete abroad and prompted us to hike prices at home.”

Canadian retaliation severely damaged the agricultural industry, another important component of U.S. exports. Overnight, small farms and manufacturers of certain products, such as processed foods and maple syrup, saw a decline in their northern market.

A Strain on Trade Relations

The freshly negotiated United States-Mexico-Canada Agreement (USMCA), which took the place of NAFTA in 2020, was weakened by the trade war. Even if the arrangement eventually proceeded, the harm to trust persisted. In order to lessen their dependency on American imports and exports, Canadian companies and leaders started looking at diversification measures after voicing worries about the unpredictable nature of U.S. trade policy.

A small but important change in the dynamics of North American commerce was brought about by this strategic turn, which was intended to improve relations with European and Asian markets.

Canada’s Resilient Response

Ironically, the war was good for certain Canadian industries. Local demand increased for domestic manufacturers of steel and aluminum, who were protected from U.S. competition by tariffs. The public's support for Canadian-made goods increased, supporting domestic industries even more.

In order to make Canadian companies more competitive internationally, the crisis also expedited government initiatives to invest in supply chain innovation and resilience.

Lessons from a Misguided Strategy

The foundation of Trump's trade conflict with Canada was the idea that tariffs would restore industrial power and level the playing field for American workers. However, the truth turned out to be more nuanced. In the end, the program provided little value to the industries it was intended to safeguard, harmed ties with one of America's most dependable allies, and produced economic inefficiencies.

The story serves as a warning as the United States continues to negotiate international competition: trade wars, especially those involving allies, can have unforeseen and long-lasting effects. It is difficult to replace long-standing business relationships, and punishing friends frequently results in self-harm.



About the Author

Sujon is a journalist and policy analyst specializing in international trade and economic policy.