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The Trump effect on Canada’s US-bound exports
The US-Canada relationship has hit new lows since US President Donald Trump took office in January. In the early weeks of his presidency, he not only threatened to annex Canada, but Trump also imposed hefty tariffs on key Canadian exports, including auto parts and metals, triggering a trade war across one of the most commercially integrated borders in the world. As a result, Canada’s exports to the US have plummeted by nearly 20% since Trump took office.
Here’s a look at how Canada’s southbound exports have evolved over the past decade.
US President Donald Trump appears onstage during a visit at US Steel Corporation–Irvin Works in West Mifflin, Pennsylvania, USA, on May 30, 2025.
What We’re Watching: Trump doubles metal tariffs, Canada Liberals bid to secure the border, Wildfires spread
Trump doubles steel and aluminum duties
Days after a judge nixed Donald Trump’s “Liberation Day” tariffs, the US president signed an executive order doubling steel and aluminum duties to 50%. Trump hopes the tariffs will boost domestic steel and aluminum industries, but the higher duties are terrible news for Canada, which is the top exporter of both metals to the US. Canada’s US-bound exports of steel were already down before Trump doubled the tariffs. Now they’re set to drop further — and take jobs with them. Mark Carney must now decide if he’ll respond, and risk provoking Trump, or back down and betray the anti-Trump, “elbows up” rhetoric he ran on.
Liberals introduce border bill in new Parliament
On Tuesday, Public Safety Minister Gary Anandasangareeintroduced the Strong Borders Act, which aims to strengthen border security, combat the trafficking of fentanyl and guns, and tackle money laundering. Anandasangaree said the bill was “not exclusively about the United States,” but admitted it aimed to remedy certain “irritants for the US.” The law would give the government sweeping discretionary powers — to open mail, for instance — so it is expected to meet a measure of resistance in Parliament.
Canadian wildfires send toxic smoke south
Wildfires in Canada have burned 2.1 million hectares (5.2 million acres) of land so far this year, sending hazardous smoke into the Midwest and East Coast of the United States, and even as far as Europe. Experts say the wildfire season in Canada is off to an extraordinary, and dangerous, start, reminiscent of the 2023 season, which was the worst in the country’s history. The flames are putting at risk the health of millions on both sides of the border.U.S. President Donald Trump and Canadian Prime Minister Mark Carney meet in the Oval Office at the White House in Washington, D.C., U.S., May 6, 2025.
There’s at least one area where Canada can thank Trump
Canadians might not like to hear this, but given President Donald Trump’s tariffs and threats, there’s at least one area of economic policy where the country owes the US leader a strange sort of thanks.
For decades, Canada’s 13 provinces and territories have maintained trade barriers against each other, a bewildering arrangement of tariffs, quotas, and regulations that has boosted prices, reduced efficiency, and yielded some absurd stories: A New Brunswick man whose beer was confiscated as he crossed provincial lines after a trip to Quebec has taken his case all the way to the supreme court.
But in response to Trump’s economic warfare on Canada, Prime Minister Mark Carney has promised to eliminate interprovincial trade barriers by July 1, Canada Day, a date that is equal parts symbolic and, let’s say, ambitious. The hope is that the economic impact of Trump’s tariffs can be at least partially mitigated by dropping Canada’s internal trade barriers.
Since 2017, Canada has had a Canadian Free Trade Agreement, but it was far from comprehensive and full of exemptions. The federal government is now talking about “one Canadian economy,” not 13. There’s even a minister in charge of it, Dominic LeBlanc, who will work with Chrystia Freeland, who is responsible for internal trade.
The cost of internal trade barriers is disputed. Ontario says they sap CA$200 billion (US$146.4 billion) of GDP a year. Other observers aren’t so sure. What’s certain is that barriers have long existed in Canada for a variety of reasons, including local protectionism for key provincial industries, such as fisheries in Atlantic Canada and timber in British Columbia, and industry-specific regulations, like where fish or lumber can be processed.
Doing away with trade barriers isn’t just a matter of lowering duties, but also of streamlining and harmonizing regulations across provinces. It’s a big lift, especially when one province, Quebec, tends to insist on greater protection for, among other things, its culture and its dairy industry, citing its distinctness.
To make progress, Carney this week held a meeting with provincial and territorial leaders, which ended with a commitment to “rapidly” reach an agreement on consumer goods, shipping, and harmonizing credentials. A nurse registered in Ontario, for example, should be able to practice in Saskatchewan within a month of moving there.
Some provinces have already struck their own bilateral trade deals. Ontario introduced legislation in April to lower barriers. It has since penned agreements with Alberta, Prince Edward Island, and Saskatchewan. In April, New Brunswick and Newfoundland and Labrador signed their own free trade agreement. Quebec says it’s open to deals and has a bill similar to Ontario’s. Ditto Manitoba. Nova Scotia is undertaking similar work.
These agreements and bills look like progress, and they are. But experts warn the hard part lies ahead in implementing what trade expert Diya Jiang and Canada expert Daniel Béland note are the “complex and technical” elements involved in trade liberalization, including various provincial regulations that account for local geography and climate. Driving a truck through the mountains of BC is different than cruising through the plains of Manitoba, for example.
As economist Trevor Tombeputs it, “Serious action requires provincial action,” and while he notes we’re seeing some of that, “much will depend on provincial follow-through.” That’s to say, for instance, that a province will have to be willing to give up industry protections, like laws in Newfoundland and Labrador that mandate local fish processing.
Still, even with all the obstacles, Tombe concludes, “We might be entering a new era for internal trade in Canada.” And for that, Canada, unexpectedly, has Trump to thank.
US President Donald Trump is joined by Secretary of Commerce Howard Lutnick and Vice President JD Vance while announcing a trade agreement with the United Kingdom in the Oval Office on May 8, 2025.
Analyzing the US trade court’s ruling against Trump’s tariffs
On Wednesday evening, the US Court of International Trade came down with a seismic ruling: President Donald Trump could not impose his “reciprocal” tariffs, which include his 10% across-the-board levy and the extra duties he announced on “Liberation Day.”
What does that mean for the president’s trade agenda? For politics in Washington? And for businesses? We asked several of the best minds in the world from Eurasia group, and here’s what they had to say.
So, let’s start with the major questions for Trump: What is the impact of the ruling? What tariffs will remain in place? Will he fight back?
The ruling blocks Trump from using the International Emergency Economic Powers Act to implement blanket tariffs, a reminder that the US political system still impose some restraints on the president, according to Eurasia Group’s Head of Research Jon Lieber.
- “Even though Trump continues to shatter Washington norms and is moving so fast the courts can barely keep up, there are still meaningful checks on his power that will be brought by the courts.”
The ruling does leave in place Trump’s other tariffs on specific sectors, like the ones on aluminum, auto parts, and steel, as well as the upcoming duties on pharmaceuticals. These sectoral tariffs are more complicated to implement, though, says Eurasia Group US analyst Noah Daponte-Smith.
- “Sectorals focus on specific sectors and require a full investigation beforehand. You can’t just declare them out of the blue.”
Trump will fight the court’s ruling – White House Deputy Chief of Staff Stephen Miller has already decried it as “judicial coup.” A federal appeals court temporarily reinstated the tariffs on Thursday, pending the administration’s appeal. A big reason for Trump’s response is that there are many benefits to the president from introducing new tariffs via IEEPA, per Robert Kahn, Eurasia Group’s managing director of Global Macro.
- “He’s turned to it often because of the flexibility, the leverage it gives, [and the] ability to basically use it in a wide variety of circumstances.”
Even if the ruling is upheld, though, Lieber predicts that Trump “will likely find other, narrower and more administratively burdensome ways to implement tariffs.” All to say, Trump’s trade war isn’t done yet.
How will this ruling affect bilateral trade negotiations involving the US?
Several countries have tried negotiating a trade deal with the United States since Trump announced his “reciprocal” tariffs on April 2. The United Kingdom nabbed one earlier this month.
But the court’s ruling could cut Trump’s leverage.
An interesting case in point is Japan, which has held regular talks with the US over a trade deal in recent weeks. Tokyo’s extra leverage means it will be more cautious about what it offers to Washington, according to David Boling, Eurasia Group’s director for Japan and Asian trade.
- “Japan will be more careful about making any big concessions, until the legality of IEEPA is decided. Likewise, US negotiators are likely to move cautiously, waiting for the legal clouds to clear.”
South Korea is also negotiating with the United States over a trade deal, but the talks may become less urgent, per Eurasia Group regional expert Jeremy Chan.
- “I think it will marginally decrease the pressure on South Korea to get a deal, and the urgency over a July 8 timeline is also gone, … so we can expect somewhat slower deliberations but still continued interest on both sides to agree to something (likely after Japan).”
What does the court ruling mean for businesses?
Markets edged up in response to the court ruling, on expectations that it would reduce the chances of an economically disruptive trade war. Kahn, though, remains skeptical of the long-term benefits to businesses and markets, saying the ruling “adds an additional layer of uncertainty to [investment].”
- “I don’t think there’s a clear consensus yet on what happens [next]. I do think it’s important to emphasize that the president remains committed to his tariff agenda, and we have to assume that he will fall back on the other tools in his arsenal.”
A portrait of former US President Ronald Reagan hangs behind US President Donald Trump as he answers questions from members of the news media in the Oval Office at the White House in Washington, D.C., USA, on May 28, 2025.
What We’re Watching: Judge jams Trump tariffs, Harvard fight moves into court, Canadian carriers cut US flights
Judges shut down Trump’s “liberation day” tariffs
Donald Trump’s tariff gamesmanship ran into a legal brick wall on Wednesday when the Court of International Trade ruled that he did not have the authority to impose his sweeping “Liberation Day” import duties. The ruling also applies to fentanyl-related tariffs but does not affect sectoral duties on Canadian automobiles, steel, and aluminum. Markets rallied, the White House plans to appeal the ruling, so uncertainty prevails.
Trump’s fight with Harvard moves to court
While the White House lawyers are coping with a setback on trade, they pushed forward with another battle that will test the limits of executive power. In a Boston courtroom today, Harvard University will argue that the Trump administration violated the university’s free speech rights when it revoked international student visas. Expect Harvard, home to one of the world’s highest rated law schools, to make compelling arguments, using the president’s words to show he is on an ideological crusade.
Airlines cut routes as Canadians stay away
Canadian airlines are grounding flights to US destinations as Canadians continue to stay away from the United States in a grassroots reaction to Trump’s threats. In April, return air trips by Canadians fell 20% compared to 2024, Statistics Canada has reported, and automobile trips fell 35%. The decline in visitors is hitting the US tourism industry hard, putting more than 230,000 jobs at risk.
Then-Bank of England Governor Mark Carney shakes hands with then-Chinese Premier Li Keqiang before the 1+6 Round Table Dialogue meeting at the Diaoyutai State Guesthouse, in Beijing, China, on September 12, 2017.
Canada faces a choice between the US and China
Amid a trade war and annexation threats, most eyes are on the US-Canada relationship right now. But the future of Canada’s relationship with China, the world’s second-largest economy, is also an open question, and observers wonder what rookie Prime Minister Mark Carney is going to make of it.
During Canada’s recent election, Carney said China was the country’s biggest security threat. On trade, the Liberal Party’s platform mentioned the Southeast Asian grouping ASEAN and the South American trade bloc MERCOSUR as potential partners for new trade deals, but not China. In fact, the party’s only mention of the superpower was in the context of security, and the necessity of being prepared to “face a hostile Russia or emboldened China.”
Some have called on Carney to build a stronger relationship with China — Canada’s second largest trade partner — particularly in the face of economic threats from Donald Trump, but his government seems wary of deepening ties with Beijing while Trump is trying to decouple the US from China.
The US and Canada have a trade relationship worth roughly $1 trillion a year, and they share a border, deep cultural ties, and a longstanding security relationship. The Trump administration, which is waging its own trade war with China, has made it clear that other countries must choose between Washington and Beijing. For now, it looks like Canada is siding with its neighbor.
Canadian Prime Minister Mark Carney gives a thumbs up as he departs after meeting with US President Donald Trump at the White House in Washington, D.C., USA, on May 6, 2025.
Elbows … up? Down? Which direction?
Canada’s new prime minister, Mark Carney, won the election largely by adopting a pugnacious “elbows up” posture against the Trump administration. But now that he’s in office, he’s adopted a more diplomatic posture. His meeting at the Oval Office two weeks ago was remarkably civilized. He even called Donald Trump a “transformative president,” though a careful observer will note the ambiguity attached to the characterization. The meeting was a prelude to future talks on trade and a renegotiation of the USMCA.
But Carney’s apparent change of heart caused problems for him last week, when Canada had reportedly dropped its retaliatory tariffs against the US. Some hawkish Canadians, including opposition Conservatives, cried foul, suggesting Carney had campaigned on being tough with Trump only to back down after winning. Whether or not the claim is accurate, it won’t stop government opponents from running with the narrative.
What’s really happened: Canada’s retaliatory tariffs are still largely in place, and Finance Minister François-Philippe Champagne says that 70% of tariffs for “end use” goods remain. The government has, however, temporarily paused some tariffs on food and beverage processing items, medical supplies and equipment, and vehicles.
The moves suggest the government is out to walk a fine line: standing up to Trump while also not provoking him and — critically — listening to domestic industries and consumers who aren’t eager to pay higher prices for essential American-made inputs simply to retaliate against the US.
The upshot: Carney isn’t in election-mode anymore. He’s governing, and watching his elbows. The strategy is to avoid antagonizing Trump, trying to bargain with him, while making it clear that Canada is not for sale and will never become the 51st state. It’s not quite what Carney ran on, but he seems to be betting that it has a better shot at working than waving a red cape in front of a bull.
Data center servers and components containing the newest artificial intelligence chips from Nvidia are seen on display at the company's GTC software developer conference in San Jose, California, USA, on March 19, 2025.
HARD NUMBERS: US lawmakers call for chip trackers, Elon’s PAC gets sued, Manitoba burns, Honda drains its Canadian battery investment, Rubber ducks migrate
8: Where do US advanced microchips go? US lawmakers want to know. A bipartisan group of eight congresspeople has introduced a bill requiring tracking technology on any export-bound artificial intelligence chips. The proposal, similar to a Senate bill introduced last week, is meant to stop cutting-edge American AI tech from going to China.
100: Tesla owner Elon Musk’s political action committee is being sued for failing to pay the $100 that it – controversially – promised to give swing-state voters who signed a pro-Constitution petition during last year’s presidential election.
21: The central Canadian province of Manitoba is struggling to control 21 active wildfires. The fast-moving blazes killed two people earlier this week and have forced the evacuation of more than 1,000 Manitobans. So far, this season’s 80 fires are nearly double the 20-year average.
11 billion: Honda is moving production of some of its vehicles from Ontario to the US, and postponing a plan to invest $11 billion in the production of EVs and batteries in Canada. The move is a direct response to Donald Trump’s 25% tariff on Canadian autos and parts.
3,000: Honda may be leaving, but the rubber ducks are coming! The owners of the Rubber Duck Museum in Point Roberts, Washington, a US town accessible only via Canadian territory, are decamping for Canada — along with their famous retail shop of 3,000 novelty ducks. The reason? Trump’s threats and tariffs on Canada have caused such a severe drop in cross-border visitors that the business can no longer stay afloat in the US.