What a trade war with Canada means for U.S. consumers

"Trade talks between the United States and Canada have broken down, and Canada's prime minister, Mark Carney, is defying President Trump in a way few world leaders have during the President's second term." "Last spring, I warned that America is trying to break us so they can own us, and I promise that that will never, ever happen." That is another terra for really what midterm voters are hoping for. It's the MPR Politics Podcast. We're recording this at 12.38pm on Tuesday, August 25th, 2026. I'm Miles Parks. I cover voting. I'm Emily Fang. I cover the White House. An MPR's chief economics correspondent Scott Horsley is also with us. Hi, Scott. Always good to talk to you. Yes. Always good. You know, we have a trade war every other week, it feels like. So it's a lot of Scott Horsley these days, but Emily, I want to start with you just to walk us through this tip for tat with Canada, which seems to be escalating every few hours at this point. Where did this all start, and how do we get to this point? Yeah, there's been this really complicated side quest in addition to all the tariffs. The US has been putting on other countries, but it begins right at the start of Trump's second term. Trump's out and he accuses Canada of looking the other way when illicit fentanyls being trapped across the border from Canada to the US. So he slaps tariffs on Canada, even though drug trafficking experts say that that just didn't comport with what was happening on the ground. Then in March, you had US tariffs on Canadian steel and aluminum, and then the big so-called liberation day tariffs, which affected a lot of the world, including Canada. And each time there were American tariffs on Canada, Canada retaliated in kind. But through pretty carefully calibrated retaliatory tariffs that never exceeded what the US put on Canada. And then this July, Trump said, "We're going to come out with even more tariffs, 50% tariffs in August on about $28 billion worth of Canadian exports to the US." And Trump and the US trade representative offices, rationale for these tariffs, were that there were discriminatory Canadian protections on American dairy and autos and liquor going to Canada. Matt, can you dig in a little bit more to these tariffs in terms of what actual products are going to be impacted by these? Yes. So the Trump administration has announced taxes on things like hockey equipment that we import from Canada and Canadian whiskey. Canada outlined their retaliatory tariffs today, and those are set to go into effect right after Labor Day. They want to tax US motorcycles and washers and dryers and cheese. One of this is really at the heart of the trading relationship. These are relatively small slices of the overall commerce between the US and Canada. But it really is another fault line in what for decades has been a very mutually beneficial economic partnership. And the president's driving a wedge there and the concern, I think, is that it could really spiral into a larger trade war. Yeah, I guess I am wondering if we can dig into that a little bit more about where this is all headed, bigger picture when it comes to the United States and Canada's close working relationship. Emily, do you have any thoughts there? I think a really good example is auto parts that have been central to tariff spats between the US, mostly on the US side towards Canada over the last year and a half. So a lot of these are exempted under this broad North American free trade agreement called the US MCA. But Trump has threatened to put 50% tariffs on Canadian autos and auto parts come this January if there isn't a resolution to this spiraling trade war. And previously, there could be American auto parts that were made here in the US shipped to Canada, assembled in a Ford car in Canada and then bought by an American consumer here. And all of that would happen duty free. It was mutually beneficial to both countries and employees workers in both countries. On the line here, but that's just how integrated the two economies are. And that free trade agreement I just mentioned, that's up for renewal. You know, the US has declined to automatically renew it. It's reviewing the trade agreement that review can take up to a decade. But that's a huge amount of trade uncertainty for businesses in both Canada and the US. We should say that US MCA was actually a renegotiation of NAFTA. And the US MCA was negotiated during President Trump's first term in the White House and he touted it back then as an enormous success as the greatest trade agreement ever. And now he is poking holes in it. I guess I'm still a little bit unclear, Scott, when you mention the list of goods, you start with hockey equipment. I'm a little unclear on how this is actually going to impact everyday Americans. Like this escalation this week. Are everyday Americans going to feel it when they go to the supermarket this upcoming week, for instance? You know, there's a lot of symbolism here. And we go after hockey sticks. That sort of speaks to Canadian culture when they target motorcycles. That goes right to the heart of Harley Davidson, a symbol of American manufacturing excellence. But this is still sort of at the symbolic level. The real problem would be if the US MCA itself falls apart and the decades of investment that businesses have made on the assumption that commerce would flow freely between the US and Canada, if that's really called into question here. That hasn't happened yet, but that's certainly sort of the tone that we're hearing from the two sides right now. Are we hearing for businesses, I guess, that are feeling uneasy at this point, Emily, about this escalation? Very much so. So, for example, American liquor has been basically boycotted by Canadian businesses for months now, even before this latest round of tariffs. And I spoke to one American bourbon maker based in Iowa. The founder's name is Jeff Quinn. And he's situated in this idyllic plot covered with corn fields. And he spoke to me about just how much instability he's facing when trying to make decisions about where to export. It takes some years to build a market, to literally have events, get to know your customers in other countries. He was doing that in Canada because he lost his European market, also due to American tariffs and retaliatory tariffs from the EU on American bourbon years ago. And he developed this Canadian market only to lose that. He says he now has basically zero Canadian customers. And he's just not sure about how the future of trade with Canada is going to look. He's hoping the USMCA gets renewed. But he also points out even under the current USMCA goods that were supposed to be exempted from customs levies, had American tariffs put on them in the last year and a half. So even that is not sacrosanct. I'm also curious about the president's style here because him and his administration have been very antagonistic to Canada. I mean, he's repeatedly threatened to take over the country to make it the 51st state. Just yesterday and main vice president, JD Vance called Canada a state before correcting himself and saying it was a Freudian slip. So I guess I'm just wondering how all of that plays into the negotiation or whether it plays into the negotiation here. 100% because this kind of rhetoric has given Canadian leaders not a lot of room to compromise. If you look at public opinion polls in Canada, the overwhelming majority of Canadians don't want their leaders to compromise on trade with the US. Look at Trump's social today, even just in the last couple of hours he was posted about how Canada's been quote ripping off the US and that the US is losing billions of dollars a year and trade with Canada without providing proof for that. And Canadian leaders, because they have this pressure back home from their voters, they've matched Trump's rhetoric with pretty aggressive rhetoric of their own. Look at the premiere of Ontario Doug Ford's rhetoric from yesterday, saying Trump is the king of bankruptcies and that Trump quote could kiss his bottom using a different word that I cannot use on air. That's created this cycle that leaves both countries with very little room to back down. And look standing up to Donald Trump, help get Mark Carney elected prime minister. And his approval rating in Canada is a lot higher right now than Donald Trump's approval rating here in the United States. Canadians are viscerally offended by the tone that this administration has taken to them. It takes a lot to rile up Canadians, but they are riled up. And even though this trade war will carry economic sacrifice for our neighbors to the north, they are absolutely behind Carney and Doug Ford when they take this hard line. And look, this is already hurting businesses in the United States. Businesses that cater to Canadian travelers are seeing a real downturn in Canadian visits to the US. Even if Canadian provincial leaders put US liquor back on the store shelves, I'm not sure Canadians are going to be buying any Kentucky bourbon or California wine. They are angry at the United States. And this is already taking a toll on US businesses and it's going to take a toll on US consumers as well. Okay. We have to take a quick break. And how all of this could play out this year in the midterms after this. And we're back. So I do want to talk about the midterms and how this is going to play out in this election season. Affordability obviously remains still a top issue for many voters. And to this point, Senator Susan Collins, Republican in Maine who's facing a very tough re-election campaign this year, has already come out against this trade war with Canada. Here she is speaking with C-SPAN on Saturday. I still think imposing new tariffs on Canada is a mistake. I really wanted us to go back to the very friendly, economically beneficial relationship that we have with our Canadian neighbours. Emily, it does feel like President Trump is making things a little difficult for Republicans running this year? Absolutely. Tariffs are in theory supposed to protect American businesses, but they've been used more in the last couple of months under the Trump administration as a negotiating tactic. So to bring countries to the table to secure deals that are more favorable to the US, but when that doesn't happen, when these negotiations, like these trade talks with Canada blow up, and the threat is even more retaliatory tariffs, that's an increasing tax on American consumers. With Canadians and pointed that out, you know, Prime Minister Mark Carnegie from Canada has pointed out aluminum prices, for example, that car makers in the US use, that go into home construction, that that's gone up double digits because of American tariffs in this trade war with Canada. And this is concerning, I think, for Trump and Republicans that are trying to run for election or re-election. It also feels like tariffs are kind of a long game strategy. Do voters see any sort of. are they able to understand or feel the benefit that President Trump has always kind of promised that they would feel from tariffs? I don't think they've seen those benefits yet. There's promises that this is going to reshore industries in the United States. I don't think that we've seen very much evidence of that. And again, with Canada, it's not as if they sell us some stuff, and when we sell them some other stuff, it's not that kind of two-way trade. I mean, there's some of that. It's also, literally, as Emily was saying, there's automobiles going back and forth across the border in the process of being produced. These two countries make things together. So this is a particularly misguided application of tariffs. The administration really conceded that tariffs are hurting affordability when they decided to relax tariffs on imported ground beef to try to tackle the high price of beef in the supermarket. It's an acknowledgement that these are taxes that are paid by US businesses and US consumers. And they're not what the American people who are concerned about affordability are clamoring for right now. Something that Republicans and Trump are going to have to clarify is what the purpose of these tariffs on Canada are. We begin this episode by talking about the first run of tariffs, which were ostensibly about fentanyl trafficking and economic and national security. Now it's become about dairy and auto and liquor tariffs. I talk to Philip Bluck, who's in the economics program at CSIS, which is a think tank here in Washington DC, and he says, look, if it's really about dairy, then make these negotiations about dairy. Don't blow up the entire bilateral relationship because of that. And let's be clear, the US has had long standing complaints about protectionist tactics in Canada that limit US dairy producers access to the Canadian market. The US has had long standing complaints about softwood lumber exports from Canada. I'm not suggesting that there is no historical trade friction between these two trading partners. There is. That's normal. But there are processes within the USMCA for dealing with those trade frictions. And there are ways to address, you know, if the US feels that Canada is dumping lumber in the US, there are countervailing duties that can be applied. But to blow up the broader trading relationship over those relatively small scale issues is just nuts. Canadian Prime Minister Mark Carney has made this point that he says US signatures on treaties at this point are signed in pencil, meaning that they can be easily erased. What do you guys make of that? Has the sort of credibility of the United States changed in recent years when it comes to trade? Absolutely. President Trump is transactional. And every transaction is an opportunity to try to get an advantage on the person sitting across the table from you. But these are long-standing relationships, and if you poison the relationship for the sake of some transactional benefit in the moment, ultimately, it's going to come back and haunt you. Case in point, the USMCA, which is being reviewed right now, it's the successor to NAFTA. But NAFTA didn't have any kind of sunset clause. So it was effective until one of the three countries, Canada, the US or Mexico pulled out of it. The USMCA needs to be renewed every six years. And there's a reason why most free trade agreements don't have a sunset clause like this because businesses need planning horizons that are longer than six years. They need to trust that those rules that have been signed are going to remain those rules. So that's a huge amount of uncertainty for businesses. I want to touch on another economic story that's bubbling this week, Treasury Secretary. Scott Bessett announced a new round of US sanctions on Iran as well this week. Emily, what can you tell us about those? They are not very new in the types of sanctions and economic pressure tactics we put on Iran over the last some 50 years. There were about 60 entities that were newly sanctioned that the US said was helping Iran sell oil or move money around. They were sanctioned yesterday. But this is kind of part and parcel of the whack-a-mole strategy that the US has taken with sanctions. You know, there are shell companies that pop up that help move Iranian money or goods around. And then the US sanctions them. They close down. Americans open up, but this is supposed to be very, very broad in scope. And Bessett seemed to really, obliquely refer to countries like the United Arab Emirates or China that have been historically hubs from money laundering and for oil trade with Iran in the past. But he was kind of mushy about what the timeline for these new economic pressure tactics would be. He said the US was calling countries to get them to voluntarily kick out shell companies or economic fronts that were giving a lifeline to Iran, but it's not clear when actual penalties might come down on countries that play host to these kinds of entities. He also didn't say specifically which countries the US was calling. It seemed like the administration was trying to tout this as a sort of game changer in the conflict with Iran. Do experts you talk to have any thoughts on that idea? The US doesn't have any direct trade with Iran. So the US has always gone after these countries and entities at the fringe around Iran who were helping Iran evade American sanctions. And it would be consequential if the US could get China in particular to crack down on economic fronts that have bought and shipped the vast majority up to 90 percent sometimes depending on the year of Iranian oil before this war. But China has already said we think these American sanctions are illegal and they actually have legislation on the books that would allow them to ignore American sanctions. This kind of call from Secretary Besant for international cooperation to advance an aim of the United States. It's the kind of thing that the United States would have done for decades when it was the architect and guarantor of an international order. But the US has spent the last year and a half trying to blow up that international order through its trade policies, through its military policies. And the rest of the world right now is in no mood to do the US any favors to advance its own aims. And a war that it started without international approval. All right, we can leave it there. Scott Horsley, thanks as always for joining us. Great to be with you. I'm Miles Parks, I cover voting. I'm Emily Fang, I cover the White House. And thank you for listening to the MPR Politics podcast.