On Monday the US imposed 50% tariffs on a long list of Canadian goods — wine, dairy, cement, electrical equipment, hockey sticks 🏒 . Energy, potash, critical minerals and fish are excluded.
The headlines hit hard and read as Canada losing again, but we read it the other way.
Source: Politico
What most people missed
For twelve months, roughly 90% of Canadian exports crossed the border tariff-free because of a pre-existing, untouched agreement. Any Canadian exporter who could document that enough of their product's content originated in North America, qualified under CUSMA and paid nothing.
So this week the US found a law that could go around that. The new tariffs come from Section 338 of the 1930 Tariff Act — a law so old and so rarely used that most trade lawyers have never seen it invoked. It was chosen for one reason: it doesn't care what CUSMA says.
The US had to dig through a ninety-six-year-old law to find something CUSMA couldn't stop. They'd already lost the first legal basis in court. This was what was left.
The first round already backfired
A year ago the argument was that tariffs would make foreign producers pay, bring manufacturing home, and shrink the trade deficit. We now have the full year of data.
We now have the 12 month numbers to explain why the US had to continue digging.
Americans paid. The New York Fed found 94% of tariff costs landed on US firms and consumers through August 2025 — about $1,000 per household, by the Tax Foundation's math.
And the deficit, the entire point of the exercise, moved by $2.1 billion against a balance measured in hundreds of billions. A drop in the ocean, rather than a meaningful impact. Then in February the Supreme Court struck down the legal basis for most of it, 6–3. Up to $175 billion may be owed back to importers.
Meanwhile Canada overtook China as the second-largest source of US imports for the first time in about a decade. Non-US exports rose roughly $33 billion — nearly 15%. And the TSX gained about 32% in 2025 against the S&P 500's 14%. For a decade we were told to look south for returns. Last year, south was the wrong direction.
That's the year that produced Monday's announcement. The escalation is the evidence tariffs did not work for the US.
The lesson underneath all of this: the default option is often the expensive one. The US assumed the obvious move would work, and paid for it.
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New tariff is a nudge to negotiate
The tariffs don't take effect until August 19 — nearly a month out. That heads up isn't an accident, it’s a window to negotiate. Carney spoke with Trump on Tuesday and the two agreed to intensify talks. On Thursday, standing beside all 13 premiers in Charlottetown, he said everything is on the table if no deal is reached — but pointedly refused to retaliate now, calling it counterproductive to respond before the options are worked through and the country is united behind them.
We are in a stronger position than we were when this trade war started. The 50% is the opening bid.
How the new tariffs affect Canadians
Here's the part the headline won't tell you: for most Canadians, almost nothing changes on August 19.
The goods hit with 50% are ones we sell to Americans — wine, dairy, vehicles, cement. They're not what you buy at the grocery store. Your prices don't move because a Canadian export gets taxed at the US border; they move if Canada retaliates and taxes what we import. That hasn't happened, and Carney has deliberately held off. So the thing to watch between now and mid-August isn't the American tariff — it's whether Ottawa answers with one.
If you work in autos, steel, or a manufacturing town in Ontario or Quebec, this is different. Those are the sectors carrying the real exposure, and both provinces were already facing the slowest growth in the country this year. If that's you, the August 19 date is a planning horizon worth taking seriously — and it's worth knowing what sector supports exist before you need them, not after.
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