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AIPROPX ReportForbes · 3h ago
This Isn’t A U.S.-Canada Trade War (Yet), It’s A Silly Schoolyard Spat
Policy This Isn’t A U.S.-Canada Trade War (Yet), It’s A Silly Schoolyard Spat By Ken Roberts ,
Forbes contributors publish independent expert analyses and insights. Two decades analyzing U.S. trade data by port, country, export, import Follow Author Aug 26, 2026, 05:00am EDT --:-- / --:-- This voice experience is generated by AI. Learn more . This voice experience is generated by AI. Learn more . Summary President Trump and Canadian PM Carney have initiated a tariff dispute, imposing 50% duties on $20 billion in goods. Though smaller than the ongoing China trade war, this conflict is fraught with risk, set against Trump's complex international challenges in Ukraine, Iran, and Gaza. The deeply integrated US-Canada trade relationship, historically vital, relies on three critical pillars: automotive, energy, and fertilizer. Threats of tariffs on auto parts, potential disruptions to Canadian oil supply, or cuts to essential fertilizer exports could rapidly escalate this "schoolyard spat" into a damaging trade war, severely impacting industries, consumers, and farmers across both nations.
I do not mean to minimize the impact the 50% tariffs that President Trump and Canadian Prime Minister Mark Carney have slung at each other in their schoolyard spat could have on some American and Canadian businesses, workers and consumers.
But this isn’t a trade war like the one Trump kick-started with China during his first term. In that one, which is ongoing, Trump imposed tariffs on some $300 billion in U.S. imports beginning in the spring of 2018. Xi Jinping’s retaliation all but wiped out China’s status as the leading market for U.S. oil and soybean exports , among other products.
In the skirmish with Canada, Trump is putting tariffs on $20 billion in goods. And threatening to change the name of Lake Ontario to Lake America after Ontario Premier Doug Ford suggested that Trump could kiss his, well, you-know-what .
It is worth noting that the reciprocal tariffs from Carney are not scheduled to go into effect until Sept. 8. Let’s call it breathing room.
Nevertheless, even though it’s not a trade war on the scale of the eight-year trade war with China, it’s still fraught with risk.
The United States has been unable to end the Russian invasion of Ukraine that Trump inherited, hobbled by an inconsistent effort and squabbles with NATO partners. The war has affected grain and fertilizer exports from Ukraine as well as limiting markets willing to accept Russian oil after U.S. sanctions.
Ahead of the midterms, Democrats want to connect those disruptions to the price of gas and food.
Trump’s invasion of Iran is at an impasse, leading Treasury Secretary Scott Bessent on Monday to declare an economic D-Day – his words, not mine – against not only Iran but any country doing business with it. China, of course, gets most of its oil from Iran and immediately issued a warning, just weeks before Xi’s visit to Washington. The Strait of Hormuz has been essentially disrupted or shuttered for months, affecting oil exports from the region.
With the House of Representatives and Senate in play, Democrats want to connect that to the price of food and gas.
The bond market’s muted response last week to Bessent’s effort to stabilize the long-bond market may reflect investor skepticism about the administration’s ability to restore confidence.
A sustainable peace in Gaza is on the ropes as Hamas and Israel are at odds on the terms of any agreement. One of the primary sticking points is whether Hamas will disarm.
So, does Trump have a fairly full plate? Yes.
Of course, all U.S. presidents tend to have a full plate even in the best of times, have tended to have had a full plate since the United States established its global leadership coming out of the Second World War with the creation of the United Nations, NATO, the Marshall Plan, the World Bank, the International Monetary Fund, the World Health Organization, which the United States no longer supports, and what became the World Trade Organization.
Trump essentially neutered the WTO in his first term, choosing not to replace appellate judges, and President Joe Biden failed to fill the positions during his term.
That makes the rules of international trade all but unenforceable.
Enter a U.S. president uniquely willing to take big gambles. While big gambles can result in huge rewards they also come with big risks.
His trade war with the world, announced on April 2, 2025, is but one example. The Supreme Court struck down the original policy. The administration has since pursued replacement tariffs that face additional legal challenges.
All of this is to say that even though the United States and Canada are not really in a trade war, don’t assume it could not escalate to that.
It is helpful to understand that Canada for decades was the United States’ No. 1 trade partner – and was as recently as 2022. Even when the overall rank was ceded first to China in 2015 and now Mexico, Canada remained the No. 1 market for U.S. exports.
Even that changed in 2025, when Mexico for the first time ranked first for not only U.S. trade and U.S. imports but also U.S. exports. Canada’s overall trade fell for the third consecutive year , something that had not occurred in decades if ever.
There are many factors to these changes but two stand out: the trade war with China and the U.S. becoming the world’s top global energy market. Through it all, Canada remains the nation’s second most important trade partner.
It’s oversimplifying but consider the trading relationship between the two to be a three-legged stool.
One leg is automotive. What NAFTA created and what USMCA has thus far kept intact is the world’s largest and most integrated supply chain. While there has undoubtedly been a shift southward to Mexico over time, all three countries remain critical to its success.
For both the United States and Canada, many of the top exports and imports are automotive-related. The discussion ap...
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