Trade deals signed under pressure rarely last

The latest U.S. tariffs show why waiting may be Canada’s strongest bargaining tool

A new series of tariffs against Canada was revealed by U.S. President Donald Trump on July 20, 2026. The tariffs are a response to Canada’s retaliatory measures introduced last year after Trump imposed his earlier tariffs.

A few weeks earlier, the U.S. said it would not renew the Canada-United States-Mexico Agreement (CUSMA) negotiated during Trump’s first term. The new tariffs are intended to tighten the screws on Canada and force concessions in negotiations over a new CUSMA.

The latest tariffs rely on a little-known provision of U.S. trade law dating back to 1930 that allows the president to retaliate against countries “that discriminate” against the United States. Although they apply to only about $28 billion of Canadian exports—about five per cent of exports to the U.S.—they may also be testing the waters for broader trade action against other sectors of the Canadian economy, or even against other countries.

Trump’s interest in this approach is understandable because the U.S. Supreme Court struck down his first wave of tariffs imposed in early 2025 in February 2026. Those tariffs relied on the International Emergency Economic Powers Act of 1977 (IEEPA), which gives the president authority to regulate economic transactions after declaring a national emergency.

Canada was exempt from the IEEPA tariffs because of CUSMA but sector-specific tariffs have had the greatest impact, hitting Canada’s steel and aluminum industries, automobile supply chains and some copper products. U.S. tariffs have also targeted Canadian softwood lumber exports through anti-dumping and countervailing duties.

This latest move also marks the fourth wave of trade shocks for Canada. More importantly, it suggests Canada’s retaliatory measures last year hit a nerve, imposing enough pain on some U.S. industries and regions to provoke another response.

The three Canadian sectors cited are alcohol, dairy and automotive. But the U.S. countermeasures are far broader, covering a wide range of Canadian exports, from agricultural commodities and forestry products to clothing, textiles, hockey sticks and essential oils.

There will almost certainly be a court challenge, and perhaps opposition in Congress. But if the U.S. Supreme Court ultimately upholds these tariffs, it could hand the president a powerful new trade tool that extends well beyond Canada.

The list of products excluded from the new tariffs is equally important. Energy, potash, critical minerals, fish and products already covered by Section 232 tariffs remain exempt. If Canada were to retaliate more aggressively, that list provides an obvious starting point.

Trump hopes these tariffs will pressure Canada into making concessions in a new trade agreement. But is any commitment from Trump worth the paper it’s written on? At best, it is a temporary reprieve that could disappear with the next political shift—or, as Canadians have learned, even the next wildfire season.

So far, Canada has made the right call by refusing to sign a bad deal. Instead, it has bought time to expand other trade relationships and encourage major public and private investment at home. Despite repeated tariff shocks and severe impacts on some industries and regions, the Canadian economy has held up much better than many expected in early 2025.

Prime Minister Mark Carney says Canada-U.S. negotiations will intensify as he pursues a comprehensive agreement covering sectors such as autos, forestry, steel and aluminum, all of which have been targeted because of their political influence in Washington. What Canada is prepared to concede to secure that agreement remains unclear and will be a defining test of Carney’s leadership.

Marc Lee is a Senior Economist with the Canadian Centre for Policy Alternatives (CCPA) with nearly 30 years of experience analyzing Canadian public policy, macroeconomics, and environmental issues. He holds an MA in Economics from Simon Fraser University and has served as a Visiting Professor at SFU’s School of Public Policy.