US-Canada trade war intensifies as new 50% tariffs on C$28bn of Canadian goods push Canada's effective tariff rate above Mexico's

The escalating trade war between the United States and Canada entered a new phase in late August 2026, when the Trump administration imposed an additional 50% levy on approximately C$28 billion (roughly £15 billion) of Canadian goods, pushing Canada's average effective US tariff rate from 2.9% to an estimated 5.7%, overtaking Mexico and approaching the rate faced by the UK at 6.2%, according to data from the Royal Bank of Canada. Canada responded with its own 'dollar-for-dollar' counter-tariffs on US goods, announced as a strategic retaliation designed to target politically sensitive swing states. According to Statistics Canada data, Ohio faces the largest exposure, with C$3.2 billion (12%) of its exports subject to Canadian counter-tariffs, followed by Illinois and Pennsylvania. Canada's retaliatory levies cover US goods including steel, furniture, cosmetics, farm equipment, and laundry machines. The cumulative toll on Canada's economy is significant. Around 55,000 manufacturing jobs were lost between January 2025 and January 2026 according to Bank of Canada data, with Ontario's auto and steel sectors bearing the brunt. The Canadian Chamber of Commerce has identified Oshawa, London, and Kitchener-Cambridge-Waterloo as particularly vulnerable. Economists estimate a further 90,000 Canadian jobs could be at risk from the most recent tariff round. Canadian Prime Minister Mark Carney has pledged to double non-US exports over the next decade and is hosting the first-ever Canada Investment Summit in September in Toronto, where foreign direct investment hit C$96.8 billion in 2025, the highest inflow since 2007. Despite the trade disruption, Canada's GDP grew 3.3% in the second quarter of 2026. Both countries are currently operating without a resolution in sight, with the underlying USMCA (United States-Mexico-Canada Agreement) framework under pressure.