Trump steps up pressure on Canada as trade fight widens beyond tariffs

The trade dispute between Canada and the United States escalated further after Ottawa imposed retaliatory tariffs on US goods, prompting US President Donald Trump to restrict imports of selected Canadian products.

Trump's latest measures have taken the trade dispute beyond tariffs and into import restrictions. US Treasury Secretary Scott Bessent said Canada's retaliation would have little effect on US inflation.

Jiang Wenran, founding director of the China Institute at the University of Alberta in Canada, said the latest moves marked a significant shift in the way Washington was approaching its trade dispute with Canada.

"Yes, this is a new phase — but selective coercion, not blanket decoupling," Jiang said.

The use of measures targeting alcohol, dairy, paper and other products, along with an outright ban on most alcohol and threats involving autos and Bombardier, showed Washington was moving beyond conventional trade negotiations, he said.

"This is no longer normal tariff bargaining — it is selective, statutory coercion under Section 338, including outright bans, and it treats even USMCA-compliant goods as targets," he said, referring to the trade pact US-Mexico-Canada Agreement.

The strategy resembled a supply chain "choke point" approach, targeting goods where the other side is exposed and using uncertainty as leverage, Jiang said.

At the same time, Washington appeared to be managing the escalation, he said.

"Because energy, potash and most fish are still largely spared, it is managed escalation — designed to maximize political pressure while limiting immediate US inflation pain," he said.

On the potential economic impact on the US, Jiang said Bessent's assessment was reasonable at the national level, but did not capture the uneven effects of tariffs on individual industries and consumers.

"US importers and consumers pay the border duty; affected sectors — wine, spirits, selected dairy, aluminum inputs, paper/wood, and eventually auto parts — see sharper price/cost rises," he said.

Canada, meanwhile, is more exposed to the economic consequences because of its heavy reliance on the US market, he said.

"Canada, with about 70 percent of exports to the US, bears larger GDP/volume damage, but US manufacturers and farmers hit by retaliation also lose," he said.

"Net: America feels small, macro inflation, sectoral spikes; Canada feels bigger output loss; neither wins," he said.

'Doubling down'

Ronald Stagg, a history professor at Toronto Metropolitan University, said he expects Trump to continue applying pressure after Canada responded with its own tariffs.

"Trump never wants to lose. When Canada responded to his new tariffs with matching ones, his response, of course, was to double down," Stagg said.

"We can expect more pressure on Canada," he said.

The Canadian government had indicated that it had gone as far as it wanted to go in retaliating, while Trump continued to seek leverage over Canada, he said.

"Trump still wants to humble Canada and bring it under America's control," he added.

Stagg agreed that the latest tariffs would not have a major immediate effect on either country's overall economy, but said the consequences would be uneven.

"It is true that the new tariffs will have little effect on the US economy, and as well on the Canadian economy, but they will hit certain states and certain parts of the US population harder than others," he said. "The same is true of Canada."

The cumulative effect of Trump's broader trade measures could nevertheless become more noticeable for Americans, Stagg said.

"While these tariffs will have little effect on the American economy, taken in combination with other steps that Trump has taken, they will gradually drive up costs for the American population," he said.

Jiang said the latest measures appeared to serve several purposes beyond generating tariff revenue, including extracting concessions from Canada and using tariffs as leverage in the review of the USMCA.

The pressure could strengthen Canada's efforts to diversify its trade relationships, he said. China and other Asian countries could provide new markets for Canadian agricultural products, energy and critical minerals, though he said they could not replace the US market.

Jiang identified canola, peas, seafood, liquefied natural gas, crude oil, nickel, lithium, uranium and potash as areas where Canada could expand exports to Asian markets.

"Asia absorbs volume and reduces US-only pricing power, but geography, terminals, rail, investment review and US political pressure cap the speed," he said.

Jiang said Canada's goal should not be to sever its deep economic ties with the US, but to reduce the risks associated with excessive dependence on a single market.