The breakdown in negotiations led President Donald Trump to impose 50% tariffs on about $20 billion worth of Canadian goods early Saturday.
Canada is now preparing to respond with “dollar-for-dollar” retaliatory tariffs starting September 8, Prime Minister Mark Carney announced.
The escalating dispute could leave American businesses facing difficult choices: stop importing affected Canadian products, absorb the higher costs caused by tariffs, or seek alternative suppliers.
However, replacing Canadian suppliers may not be easy. Many businesses originally chose Canadian products because of lower costs or logistical advantages, meaning that switching suppliers could also lead to higher expenses.
With the ongoing war in Iran already pushing up energy and transportation costs, businesses may have less ability to absorb additional expenses. As a result, some of the higher costs caused by tariffs could eventually be passed on to American consumers.
Three major categories of products could be among the first to become more expensive:
Paper products
The new tariffs cover a wide range of paper products, including parchment paper, paper cups and plates, as well as kraftliner, a strong type of paperboard mainly used in the outer layer of cardboard boxes.
The tariffs also affect around three dozen types of plywood. These broader categories accounted for approximately $1.5 billion in US imports from Canada last year.
Alcoholic beverages
Wine, beer and spirits, including whiskey, vodka and gin, are also affected by the new tariffs. The United States imported around $1.5 billion worth of these products from Canada last year.
Alcohol has been a major point of disagreement between the two countries. Several Canadian provinces removed American alcohol products from store shelves last year in response to US tariffs, and many of those restrictions remain in place.
During recent trade negotiations, Carney reportedly asked provincial leaders to consider returning American alcohol products to shelves in an effort to help secure a trade agreement.
Dairy products
A wide range of Canadian dairy products, including milk, cheese, butter and whey, are also caught up in the trade dispute.
The United States imported about $780 million worth of dairy products from Canada last year.
Trump has accused Canada of unfairly restricting American dairy exports, alongside what he describes as discrimination against US vehicles and alcoholic beverages.
If Canada proceeds with its planned retaliatory tariffs, the dispute could intensify further, potentially increasing costs for businesses and consumers on both sides of the border.
