Why It Matters

The U.S.-Canada commercial relationship faces new tariffs, retaliatory measures, and uncertainty over the agreement that currently governs trade. A new Congressional Research Service report titled “U.S.-Canada Trade Relations” puts the policy tension in concrete terms: the Trump administration has used several tariff authorities while Canada has answered with measures covering U.S. goods.

The Canadian public has engaged in an informal boycott of U.S. goods and reduced travel to the United States.

The Big Picture

The current framework followed the U.S.-Canada Free Trade Agreement and the North American Free Trade Agreement, which governed trade successively since 1989 before USMCA took effect.

In 2025, the United States imposed duties on about 15% of imports from Canada by value, or about $56 billion in affected imports, with calculated duties totaling $10 billion. In 2025, President Trump imposed tariffs on Canadian goods under the International Emergency Economic Powers Act (IEEPA) and Section 232 of the Trade Expansion Act of 1962, and eliminated nearly all Canadian exemptions from Section 232 steel and aluminum tariffs. After the Supreme Court held in February 2026 that IEEPA does not give the President authority to impose tariffs, the Administration ended the IEEPA tariffs and imposed a 10% temporary import surcharge for 150 days under Section 122 of the Trade Act of 1974.

When that surcharge expired in July 2026, the Trump Administration imposed a 10% tariff on Canadian goods following a USTR Section 301 investigation concerning economies’ enforcement of prohibitions on imports produced with forced labor.

In August 2026, President Trump imposed 50% tariffs on certain Canadian alcohol, dairy, paper and wood products, steel and aluminum, and other goods under Section 338, citing alleged Canadian discrimination against U.S. commerce, and the action marked the first express U.S. citation of Section 338 to impose tariffs. Following Canada’s retaliation, the United States invoked Section 338 to ban imports of certain Canadian goods effective September 29, while most Section 338 tariffs applied in addition to Section 232 tariffs beginning September 15.

Canada has challenged the Section 232 tariffs at the World Trade Organization, and Canadian tariffs remain on U.S. vehicles and C$15.6 billion of U.S. steel and aluminum.

The Bottom Line

Canada’s share of U.S. crude oil imports by quantity rose from 41% in 2015 to 64% in 2025, while the United States was the largest source of foreign direct investment by stock in Canada at $488 billion and Canada was the third-largest source of U.S. foreign direct investment by stock at $747 billion.

Canadian firms are eligible for U.S. federal funding, including for projects in Canada, under the Defense Production Act, and USTR is pursuing negotiations on a potential plurilateral agreement on critical minerals trade at the President’s direction. In June 2025, Canada enacted legislation preventing future increases to dairy tariff-rate quotas or reductions in over-quota tariffs during future negotiations. Softwood lumber has lacked a governing bilateral agreement since October 2015, and the United States has imposed antidumping and countervailing duties that apply in addition to other tariffs on timber and lumber imports.

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