Canada-US Trade War: What's Happening With Tariffs and How It Affects Immigration

The trade war between Canada and the US plays out through mutual tariffs and import bans, but it hasn’t directly touched immigration so far: the permanent resident intake plan remains unchanged, even as the labor market has already felt the first job losses.

In short

• On July 20, the US applied Section 338 of the Tariff Act of 1930 for the first time since 1949 — tariffs of up to 50% against Canada.
• Canada responded with mirror tariffs worth 28 billion Canadian dollars and adopted a 7.5 billion dollar aid package.
• In August, Canada lost 42,000 jobs instead of an expected gain of 15,000, and wage growth fell to 2% — the lowest since 2017.
• Workers laid off because of tariffs had their Employment Insurance extended to 65 weeks, and employers received preferential loans and retraining subsidies.
• Starting January 1, 2027, the tariff on Canadian cars could rise to 50%, even though 85% of Canadian-made cars are exported to the US.

How the Canada-US Trade Conflict Began

The trade war began in February last year, when the US imposed 25% tariffs on Canadian goods under the official pretext of fighting fentanyl allegedly flowing through the northern border. The rate was later raised to 35%, with an additional 50% tariff on steel and aluminum, 25% on cars, and separate tariffs on lumber and copper.

In February this year, the US Supreme Court ruled the fentanyl tariffs illegal: six justices to three decided that imposing them under the pretext of a national emergency is Congress’s power, not the president’s. That same day, Trump introduced new tariffs under a different law.

On July 20, he took a step no president had taken since 1949: new tariffs against Canada were imposed under Section 338 of the Tariff Act of 1930. That law was passed during the Great Depression and had gone unused for 96 years. It allows the president to impose tariffs of up to 50% against any country that, in his judgment, discriminates against American trade — and that was exactly the justification used for the new tariffs on Canadian goods.

On July 20, he took a step no president had taken since 1949: new tariffs against Canada were imposed under Section 338 of the Tariff Act of 1930.

The Free Trade Agreement: Why It Didn’t Stop the Tariffs

The free trade agreement between Canada, the US, and Mexico was supposed to automatically renew for another 16 years, but on July 1 the US refused to confirm the renewal — Canada and Mexico voted in favor, America said no. Formally, the agreement hasn’t been torn up: it remains in force, but it now has an expiration date of 2036, and from this point on it will be reviewed annually — the next review is set for July 1, 2027.

That’s precisely why the agreement didn’t stop the tariffs: the new duties against Canada weren’t imposed under the agreement but under a separate Tariff Act of 1930, which is unrelated to the trade agreement and has no expiration date. As long as the agreement is formally alive, it preserves its other terms too — including streamlined work visas for Canadians in the US.

Talks Collapse and Tariffs Take Effect on August 22

The tariffs were set to take effect on August 19, and by that date the two sides had nearly reached a deal — Trump even delayed the tariffs by 3 days because of the progress in negotiations. But on Friday evening, August 21, just minutes before midnight, Canada’s prime minister announced a suspension of talks and the withdrawal of the Canadian delegation. He cited last-minute changes to the American terms as the reason, calling them unfair, uneconomical, and a threat to the reliability of any future deal.

The Canadian side named two US demands. The first was to limit Canada’s right to sign trade agreements with other countries — effectively requiring Canada to clear with the US who else it could trade with. The second was to exclude trucks from any tariff relief. The American side told a different story: the trade representative said it was Canada that raised new demands and walked back on already agreed terms, while the US had offered reduced tariffs on steel, aluminum, cars, and lumber — the best terms among all major exporters.

The outcome of the talks arrived at midnight on August 22: 50% tariffs took effect.

The outcome of the talks arrived at midnight on August 22: 50% tariffs took effect.

Canada’s Retaliatory Tariffs and the US Ban on Canadian Goods

On September 8, Canada imposed mirror tariffs — 15%, 25%, and 50% on American goods worth roughly 28 billion Canadian dollars in total. The amount matched the size of the American tariffs: the principle was framed as “dollar for dollar, rate for rate.” The list covered nearly 900 product categories.

The tariff on American steel and aluminum rose from 25% to 50% — the same rate now applies to furniture and clothing from the US. Dishwashers and washing machines, American cheese, fish, and seafood were set at 25%. Only goods actually manufactured in the US fall under the tariff: appliances assembled in another country and bought through an American retailer aren’t subject to it.

Starting September 29, the US went further than tariffs and imposed an outright ban on importing some Canadian goods. Part of Canada’s dairy products and motorcycles fell under the ban. While a tariff can partly be passed on to the buyer, a ban can’t be worked around — for Canadian alcohol and motorcycle producers focused on the American market, this means a complete loss of US sales.

Beyond tariffs and the ban, US federal agencies were ordered to exclude Canadian goods from government contracts — until Canada ensures “full and fair reciprocity.” Separately, there was a threat to close the American market to Canadian private jet maker Bombardier, for which the US accounts for half of its sales.

The Auto Industry and the Border: What Comes Next

The tariff on Canadian cars currently stands at 25%, but starting January 1, 2027, Trump has promised to raise it to 50% — covering passenger cars, trucks, parts, and steel all at once. For the industry, this isn’t an abstract number: 85% of cars manufactured in Canada are exported to the US.

Ontario plants operate in tandem with American facilities, and parts cross the border several times before a vehicle is fully assembled. A 50% tariff breaks that production chain — assembly becomes unprofitable precisely because components are already taxed at every crossing.

A 50% tariff breaks that production chain — assembly becomes unprofitable precisely because components are already taxed at every crossing.

The scale of interdependence between the two economies is reflected in the border itself: it stretches nearly 9,000 km. If the tariff hike takes effect as announced, Ontario’s auto industry faces its toughest year in the last decade. If Trump backs off the deadline instead, it will signal that pressure on the American side worked.

How the Trade War Has Hit Canada’s Labor Market

In the second quarter, Canada’s economy grew 3.3% year over year — the fastest growth since early 2023. From April to July, 181,000 jobs were added, and unemployment fell to 6.4%, a two-year low: a year earlier it was nearly 7%.

In August, the picture reversed sharply: the country lost 42,000 jobs, while economists had expected a gain of 15,000. Wage growth slowed to 2% a year — the weakest reading since 2017. The survey behind this figure was conducted in mid-August, before the new wave of tariffs was in full effect, so September data could look worse. According to the Bank of Canada, by year-end the economy will be about 1% smaller than it would have been without the tariffs, and roughly 90,000 jobs are at risk from the new wave of tariffs.

The hardest-hit sectors are dairy, agriculture, electronics, and building materials, along with the auto industry, steel and aluminum manufacturing in Quebec and Ontario, forestry and winemaking in British Columbia, and furniture makers in Quebec.

Other sectors have been barely touched by the trade war. Healthcare added 129,000 jobs over the year, transportation and logistics added 47,000. IT and finance aren’t directly exposed to tariffs.

Government Support: What’s Available to Workers and Employers

Alongside its retaliatory tariffs, the Canadian government announced a 7.5 billion dollar aid package — part of that money can go directly to workers and employers hurt by the tariffs.

For workers who lost their job because of tariffs:

• Employment Insurance benefits are extended by another 20 weeks — bringing the total to up to 65 weeks, more than a year;
• the one-week waiting period at the start of benefits is waived;
• severance pay from an employer no longer reduces EI benefits — a worker can receive both;
• if a person quit a job on their own and then lost a new job through no fault of their own, the earlier resignation is no longer held against them;
• these rules are in effect for one year;
• for those working under a work permit, Employment Insurance is also available — provided the employer made contributions and the worker’s status allows them to work, though the conditions differ from the general rules.

For employers:

• a new work-sharing program lets employers move staff to reduced hours instead of layoffs — the government covers the wage difference through Employment Insurance;
• employers get up to 1,000 dollars for each employee sent for retraining;
• a separate 450 million dollars has been set aside to retrain 50,000 workers;
• the Business Development Bank offers preferential loans from 250,000 to 5 million dollars, with interest-only payments for the first 3 years.

Government Support If You Lost Your Job Because of Tariffs

• Check eligibility for extended Employment Insurance — up to 65 weeksrequired20 weeks longer than usual
• Confirm whether the one-week waiting period has been waived
• Verify that severance pay doesn’t reduce your EI benefitsboth payments can be received at once
• Check your status if you previously quit a job and then lost a new one through no fault of your ownthe earlier resignation is no longer held against you
• Workers on a work permit — check employer contributions and status eligibilityrequiredconditions differ from the general rules
• Employers — look into the work-sharing program as an alternative to layoffsreduced hours topped up by the government
• Employers — apply for the retraining subsidy for staffup to 1,000 dollars per person
• Employers — consider a preferential loan through the Business Development Bank250,000 to 5 million dollars, interest-only for the first 3 years

What’s Happening With Immigration and Visas to Canada and the US

US immigration rules have changed faster than lawyers could keep up during the trade war. The 100,000 dollar fee for the H-1B work visa was introduced, struck down in court, reinstated, and blocked again — at the moment it’s formally not in effect, but the government keeps litigating, and the order itself expires at the end of September and may be extended. If even lawyers can’t say how much an H-1B visa will cost a month from now, long-term planning for a move to the US currently carries elevated uncertainty.

A similar instability applies to tourist visas. The US made a visa bond permanent for citizens of fifty countries: arrive, put down 10,000 to 20,000 dollars, leave on time and get it back, overstay and lose it. For some countries, visas aren’t issued at all because of entry bans, and the list of countries changes periodically. As of September 15, students lost their open-ended status for the duration of their studies — a student visa now has a specific expiration date.

The situation with Canada is different. The current immigration plan calls for admitting 380,000 permanent residents a year, Express Entry and provincial programs are running as usual, and the trade war hasn’t affected processing speed. Over 8 months, Express Entry has issued more permanent residence invitations than in any full year in the system’s history.

The current plan was adopted last fall, before the present escalation of the conflict. The government is required to submit the new immigration plan for 2027-2029 to parliament by November 1 — meaning that in just a few weeks it will become clear how the trade war has affected the quotas.