The long-standing trade cooperation between Canada and the United States (U.S.) has recently been shaken by a new wave of tension. U.S. President Donald Trump’s decision to increase tariffs on Canada and Canada’s retaliatory measures in response have affected economic balances. Significant impacts are particularly felt in the agriculture, food, industry, and labor markets.
One of the biggest impacts of trade wars is felt in the agricultural sector. The agricultural industries of Canada and the U.S. are deeply interconnected. While farmers in the U.S. rely on potash imported from Canada, Canadian farmers import phosphate fertilizer from the U.S. However, the U.S. imposing additional tariffs on Canadian potash and Canada retaliating against U.S. phosphate have increased costs for farmers. The increase in fertilizer prices increases production costs and negatively affects farmers’ profitability.
Farmers in Saskatchewan, in particular, are under serious economic pressure due to rising costs of agricultural inputs. In the United States, corn and soybean producers are facing additional costs due to rising fertilizer prices. This disrupts production processes and makes it difficult for farmers to make long-term plans.
Another major sector affected by trade wars is the food industry. Canada used to import a significant amount of pork from the U.S., but the Ottawa administration has halted imports from Smithfield Foods’ largest pork processing facility in Tar Heel, North Carolina.[1] Behind this decision lies Canada’s effort to protect its own food production during the tariff wars. However, while this has resulted in a significant market loss for U.S. meat producers, it has also caused disruptions in Canada’s meat supply chains.
One of Canada’s measures to counter the tariff crisis is its goal of reducing dependence on exports to the U.S. The government has announced a $6 billion support package to encourage exporters to find new markets.[2] As part of this package, $5 billion has been allocated to businesses for developing new export routes.[3] Additionally, an extra $1 billion is being provided to support agricultural producers and the food industry.[4] However, finding alternative markets is a time-consuming process, putting significant short-term pressure on the Canadian economy.
The economic uncertainties caused by trade wars are also reflected in the labor market. In Canada, the unemployment rate remained at 6.6% in February, while the rate of new job additions remained quite low.[5] It is stated that tariff wars in particular delay companies’ hiring decisions and put pressure on economic growth. Cost increases in the agricultural and food sector cause companies to suspend hiring in order to reduce their costs.
The Canadian government has implemented the Employment Insurance Work-Sharing Program to prevent unemployment.[6] Under this program, employers reduce the working hours of their employees, while employees are supported by unemployment insurance benefits. In this way, layoffs are tried to be prevented. However, the effects of this program are limited and it is foreseen that there may be contractions in the employment market in the long term.
Canada’s economic dependence on the U.S. is not limited to agriculture and industry. Canada is one of the largest oil suppliers to the U.S. and exports a significant portion of its energy to the U.S. However, trade wars and rising tariffs create uncertainty in this sector as well. Tax changes and protectionist policies in U.S. energy policy could impact Canada’s oil and natural gas exports. As a result, investments in Canada’s energy sector may slow down, and the search for new markets could accelerate. While the shift towards alternative energy sources becomes more likely, the economic burden of this transition could be heavy.
Although the direct effects of trade wars are felt by producers and exporters, their indirect effects are also reflected on consumers. Additional taxes imposed on agricultural products and industrial goods imported from the US cause an increase in retail prices. While food prices in supermarkets in Canada are increasing, especially basic food items such as meat and dairy products are becoming more expensive. At the same time, tariffs applied to imported machinery and automobile parts increase the cost of industrial production, placing an additional burden on local consumers. This situation reduces the purchasing power of the public and puts pressure on economic growth.
Economic tensions are not limited to trade and business. The growing trade wars in Canada-U.S. relations are also straining diplomatic ties. As Canada seeks to strengthen its economic independence, it feels the need to reassess its trade agreements and diplomatic connections with the U.S. In particular, negotiations with international trade organizations and new trade partners could shape Canada’s global economic strategy. Meanwhile, trade tensions with the U.S. are also influencing Canada’s political landscape, increasing criticism of the government’s economic policies. This process has the potential to bring significant changes to both Canada’s domestic and foreign policies.
Considering Canada’s economic dependence on the U.S., the long-term effects of these trade wars could have serious consequences. Seventy-five percent of Canada’s exports go to the U.S., while one-third of its imports come from the U.S.[7] This shows that U.S. tariffs have a direct impact on the Canadian economy. Although the Canadian government’s efforts to diversify export routes aim to increase economic independence, this process is costly and challenging in the short term.
Developing alternative trade routes could reduce Canada’s economic dependence on the United States. However, such changes require time and investment. Opening up to new markets, establishing international trade agreements and diversifying production processes are steps that can increase Canada’s long-term economic resilience. However, in the short term, companies and workers are expected to be negatively affected by this transformation process.
As a result, the Canada-US trade wars are seriously affecting not only the agriculture and food sectors, but also the overall economy and labor market. While the measures taken by the Canadian Government have provided partial relief, more comprehensive policies need to be put in place to achieve long-term economic independence goals. The effects of the trade wars will become clearer over time and will continue to shape Canada’s economic strategies.
[1] Polansek, Tom. “Canada Suspends Imports from Biggest US Pork Processing Plant”, Reuters, https://www.reuters.com/markets/commodities/canada-suspends-imports-biggest-us-pork-processing-plant-2025-03-07/, (Accessed Date: 09.03.2025).
[2] Mukherjee, Promit, and Ryan Patrick Jones. “Canada Commits over C$6 Billion to Fight Impact of US Tariffs, Find New Markets”, Reuters, https://www.reuters.com/markets/canada-launches-c5-billion-program-help-exporters-reach-new-markets-2025-03-07/, (Accessed Date: 09.03.2025).
[3] Ibid.
[4] Ibid.
[5] “Canada’s Economy Adds Few Jobs in February; Unemployment Unchanged”, Reuters, https://www.reuters.com/markets/view-canadas-economy-adds-few-jobs-february-unemployment-unchanged-2025-03-07/, (Accessed Date: 09.03.2025).
[6] Gowling, Jordan. “Ottawa Unveils Aid for Businesses and Workers Hit by Tariff War”, Financial Post, https://financialpost.com/news/canada-aid-businesses-workers-tariff-war, (Accessed Date: 09.03.2025).
[7] Mukherjee and Jones, a.g.e., (Accessed Date: 09.03.2025).
