Commonwealth_ The US-Canada trade war has escalated with the US increasing its tariffs on Canadian imports from 25% to 35%. While the majority of goods are exempt because of a North American trade agreement, some of the most significant product categories are severely affected by the escalation of the war.
Canada had already struck back earlier in the year by imposing a series of retaliatory tariffs on tens of billions of dollars’ worth of U.S. products. They include mundane household items like washing machines and tomato ketchup. Therefore, Canada is already anticipating price hikes for essential items.
One of the sectors that is hit hardest by the tariffs is home appliances. Canada imposed counter-tariffs on US-built washers, dryers, refrigerators, and air conditioners. The price of these appliances increased due to the US raising its tariffs on imported sheet metal. Refrigerators and freezers have increased by about 2% for Canadian buyers, and dishwashers and washing machines by 4.5%. But the effect is partly mitigated because not all such appliances sold in Canada are of US origin.
The highly integrated supply chains for auto manufacturing in North America have also impacted the automotive industry. An automobile may cross the US-Canada-Mexico border several times in its production cycle. The US has placed a 25% tariff on all non-US-made cars and trucks, prompting Canada to establish reciprocal tariffs. There are exceptions for auto manufacturers in coordination with the North American Free Trade Agreement as well as those that have manufacturing facilities in Canada. These tariffs are on top of increased industry costs due to US metal tariffs. The combined effects have added to the price of new vehicles by more than 5% during the same period last year.
Canadian shoppers who venture out for groceries are also noticing the difference. Counter-tariffs were imposed on many US foods, but a temporary six-month relief began in April on some items to ease the pressure on Canadian companies. Stores are still displaying the impact of the pressure. Loblaw, Canada’s largest grocery store chain, has labeled nearly 7,500 items that have experienced price increases due to tariffs. They include US-imported tomato ketchup, sauces, peanut butter, jam, turkey, oranges, and pasta. Prices for fruit juice have increased 7.5% compared to last year, primarily due to tariffs on US citrus. Apart from that, the cost of canned soups has also increased 8%, since most of Canada’s food packaging materials, including steel cans and aluminum cans, are imported from the US.
Even Canada’s fashion and footwear sector has experienced an unusual price increase. Although tariffs on American clothing have been imposed, the recent 2% increase in clothing prices is reported to be more affected by global trade tensions than bilateral tariffs. Other countries that are top garment manufacturers, like Vietnam and China, have been affected by US tariffs, making supply chains uncertain and interrupted. This realignment has brought about a reversal of the decades-long decline in clothing prices.
Developers in the housing and construction sectors are bracing for higher costs. As tariffs raised the cost of foreign materials, some domestic projects have fallen behind as firms seek local or other foreign suppliers. Certain items, including double-glazed glass windows, have limited alternate sources other than in the US, so builders had no option but to absorb the higher costs. Canada’s retaliatory tariffs on products such as carpets, flooring, and shingles contributed to the squeeze. There has already been a noted increase in the costs associated with home maintenance and repairs, specifically for plumbing, utilities, and structural steel framing.
The analysts at Canada Mortgage and Housing Corporation estimate that the prolonged trade war could potentially delay overall economic growth, particularly affecting housing sales, purchases, and new construction.
