How US tariffs on Canada could impact you — and what you can do

United States President Donald Trump’s second term in office has led to fraught US-Canada relations. On February 1, 2025, Trump ordered 25% tariffs on Canadian imports to the US, upending both nations’ long and tight-knit trade relationship. In response, the Canadian government announced retaliatory 25% tariffs on American imports.

In early March, after an initial 30-day pause and more about-turns, the tariffs came into effect: 25% on imports from Canada and Mexico that did not fall under the Canada-U.S.-Mexico Agreement (CUSMA, also known as USMCA), 25% on steel and aluminum, and 10% on Canadian energy and potash.

On July 20, 2026, President Trump announced additional 50% tariffs on a sweeping list of Canadian goods. According to the U.S., these tariffs are in response to “Canada’s discriminatory treatment of American products”. The tariffs, which fall under Section 338, apply to all covered goods, even those under CUSMA, but do not apply to energy, potash, or other products already subject to tariffs under Section 232. 

On September 29, 2026, the US announced a ban on certain Canadian alcoholic beverages, dairy and motorcycle imports. On October 30, the US adjusted the list of products subject to 50% tariffs under Section 338, removing 22 items and adding another 100.

The Trump administration continues to fuel the trade war with Canada by threatening new tariffs. For example, in a social post, Trump wrote that tariffs on cars, parts and steel will increase to 50% starting January 1, 2027. On July 21, it was announced that any generic drugs imported to the US will face a 100% tariff starting in August 2028, which will increase to 200% the following year. 

So, what does this trade war mean for the Canadian economy? More importantly, what can Canadians do for their financial security? Let’s dive in.

A tariff is essentially a tax that a country levies on imports or exports of goods with foreign countries. For instance, Canada’s biggest exports to the US include fuels, vehicle parts and machinery. 

When a tariff is imposed on imports from Canada, US importers have to pay those tariffs, making the goods more expensive. This cost is passed on to US consumers, but Canadian consumers are also impacted if products made with Canadian materials and parts are then exported back to Canada.

As a result, US importers will try to negotiate with Canadian exporters for a lower price, or switch to importing goods from another country with lower prices and/or tariffs. Either way, Canadian businesses will take a hit.

To fight back against the US tariffs, the Canadian government initially implemented counter tariffs on US goods in March 2025. However, most of these tariffs were removed as of September 1, 2025. Canada's 25% tariffs on steel, aluminum, and automobiles remain in place and have since been increased to 50%. 

More recently, Canada implemented retaliatory tariffs that took effect on September 8, 2026, after trade negotiations with the US failed, following the US's 50% tariffs on Canadian goods. The retaliatory tariffs are ‘dollar for dollar’ and apply to sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. The tariffs also apply to products subject to Section 232 and Section 338 tariffs. The complete list of US products being counter-tariffed totals $27.6 billion.

At the provincial level, Ontario Premier Doug Ford said he will not lift the ban on US booze. As it stands, only Alberta and Saskatchewan have lifted their bans on US alcohol, while other provinces continue to hold firm.

What do the US midterm results mean for tariffs on Canada?

The Democrats won control of Congress in the November 3, 2026, midterm elections, but short-term tariff relief for Canada is unlikely. The new members of the House and Senate will take office in January 2027, meaning the current tariffs will stay in place for now. 

While Democrats hold a majority in both houses, the President imposed tariffs on Canadian goods under existing trade laws, not through Congressional approval. To remove the tariffs, Congress would need to pass legislation, which Trump can veto. To override a veto, Democrats need a two-thirds majority in both the House of Representatives and the Senate, which they do not hold. 

However, this win for the Democrats means Trump now faces a Congress that can block his legislative priorities, vote to roll back tariffs, and hold hearings. One bill in particular, Senator Chuck Schumer’s “End Trump’s Tariff Tax Act,” would remove Section 338, which is the law used to impose the 50% tariffs on Canadian goods. It would likely be vetoed.

As for Canada’s current position with the US, Canada-US relations expert Asa McKercher says the Democratic majority could give Prime Minister Mark Carney more leverage to negotiate a mutually beneficial deal. But the Republican loss could make President Trump more unpredictable and create more uncertainty for Canada’s relationship with the US. 

Even with Democrats in control, tariffs and economic uncertainty are likely to continue. The best thing you can do is strengthen your finances.

How has the trade war affected the Canadian economy?

The trade war has taken a toll on the Canadian economy by increasing costs for consumers. However, the economy has performed better than initially expected. 

In early 2026, there were concerns that Canada had fallen into a technical recession, but revised data showed the economy grew slightly in Q1. GDP grew 3.3% annualized in Q2, and the Bank of Canada estimates growth around 2% in Q3, with growth expected to slow in Q4 and pick back up in 2027. The unemployment rate has stayed around 6.5% for several months. 

Most recently, on October 28, 2026, the Bank of Canada increased its overnight rate to 2.50%, its first hike in more than three years. The Bank cited inflation and high energy prices as reasons for the rate hike, aiming to reduce the risk of high energy costs spreading to the prices of other goods and services. 

Amid any political and economic uncertainty, the only thing you can be sure of is your personal finances. Here are a few things you can do to prepare yourself financially should your job be affected:

Build up your emergency savings

It’s always prudent to save for a rainy day, so you’ll want to make sure you can survive six to 12 months of unemployment and price hikes. Review your budget, see if you can spend less and save more in your emergency fund, and put it all in a high-interest savings account where you can readily access your funds if needed.

If you’re currently in debt, make paying it off your top priority.

Review your auto insurance policies 

With the automotive sector already dealing with 25% auto tariffs, now is not a bad time to shop for a cheaper auto insurance rate before any further increases to pricing come into effect. The impact of the tariffs may not be fully felt this year, but it surely will in the years to come, as the industry plays catch-up on recouping added expenses. 

Review your auto insurance policies to make sure you’re getting the most comprehensive coverage at the lowest rate tailored to your needs.

Balance market volatility with low-risk investments 

Even though the stock market rallied in the aftermath of the US presidential election, Trump’s tariffs (and overall unpredictable moves) bring significant volatility to the market. If your risk appetite is low, GICs offer modest returns compared to stocks, funds, and crypto — but they’re also the best option for stress-free investing. 

Consider purchasing GICs through a tax-sheltered account like your TFSA or RRSP to get the most out of your investment and ensure the rates can help you combat inflation. Alternatively, you could also invest in funds that are based on high-interest savings or bonds.

If you already have long-term investments, there’s no harm in keeping them as long as your portfolio remains at the same risk level or becomes lower-risk.

Lock in a rate if your mortgage is due for renewal

If your mortgage is up for renewal this year, consider starting the process sooner rather than later. Most lenders will allow you to begin your mortgage renewal 120 days prior to your actual term end, which gives you the chance to take out a rate hold. Doing so will guarantee you access to the lowest rate available to you today for up to 120 days, even if fixed interest rates rise or lenders narrow the spreads to prime on their variable mortgage rates.

Remember, variable rate mortgages are tied to the overnight rate, which means they will rise if the Bank of Canada decides to hike rates again in the future. In general, a variable mortgage rate provides less stability to your finances than a fixed rate, which is tied to the bond market. If you’re looking to rid yourself of anxiety over fluctuating rates, now is a good time to secure a 3-year or 5-year fixed rate.

Canada continues to battle uncertainty in 2026 as new tariffs are imposed and inflation pressures persist. While the economy has held up better than expected, it is best to approach your personal finances with caution. 

In this uncertain time, make it your priority to stay afloat financially. When things clear up in the future, you'll be in a better position to build your wealth.

 

Also read:

• How are US tariffs impacting Canadian mortgage rates?
• What 25% U.S. auto tariffs mean for vehicle prices in Canada
• How will a second Donald Trump term impact the Canadian economy?
• The best GIC rates in Canada 2026