US-Canada trade war heats up as Trump threatens to hike auto tariffs

Businesses on both sides have warned that they stand to be hurt by the new wave of US tariffs on Canada, as well as the retaliatory tariffs that Canada plans to impose on 8 September.

In Portland, Oregon, Mike Roach and Kim Osgood, owners of Paloma Clothing say the price of one of their best-selling items – specially designed pillows made in Canada – could shoot up by around 50% to $90. For now, they are holding out on keeping the prices steady, hoping that the “tariff problem” is worked out soon, said Roach.

“It would be one thing if we had three months’ notice – that would be something you could plan around, do some work with the vendors,” he said. “But when it happens literally overnight you’re really stuck.”

The rapidly escalating trade war is also raising questions about the other country in North America – Mexico – and the trade pact between the three neighbours known as the USMCA.

Both Canada and Mexico have said they want the USMCA extended for another 16 years, but the US has said it will not renew in its current form. The pact underpins $1.6tn in North American Trade.

Escalating trade tensions mean “the risk of the USMCA unravelling has increased”, experts from the Oxford Economics forecasting firm warned on Monday. That, in turn, “would plunge Canada into recession and leave it on a permanently lower growth path”.

Additional reporting by Ana Faguy.