How Canada is getting squeezed with tariffs by both Donald Trump and China

Canada's key industries - including agriculture, seafood, auto manufacturing, and energy - are bracing for economic fallout as US and China both impose increased tariffs

Canada finds itself at the centre of escalating trade disputes, facing tariffs from both the United States and China. Washington has placed its own set of tariffs on Canadian goods, claiming trade imbalances and border security concerns, while Beijing has levied heavy charges on Canadian seafood and agricultural exports in retaliation for Ottawa's ban on Chinese steel, aluminium, and electric vehicles.

 

Analysts warn of possible job losses and recession concerns as Canada's major industries, including agriculture, seafood, car manufacturing, and energy, prepare for economic impact as punitive measures mount on both fronts.

 

Following Canada's October decision to apply charges on Chinese-made steel, aluminium, and electric vehicles, China said on March 8 that it would slap retaliatory tariffs on Canadian agricultural and food imports, which would take effect on March 20. The new measures include a 100 per cent tariff on Canadian rapeseed oil, oil cakes, and peas, along with a 25 per cent tariff on pork and aquatic products.

 

 

Canada’s escalating trade war with China 

The move escalates trade tensions between the two countries, with China mirroring Canada’s October tariffs, which included a 100 per cent duty on Chinese electric vehicles and a 25 per cent tariff on steel and aluminum. China's recent actions would have a particularly negative impact on Canada's seafood industry, which is already unsettled owing to possible US penalties. China's tariffs, which would affect key seafood exports like lobster, snow crab and prawns, will go into force on March 20. The United States has suspended its 25 per cent duty on Canadian seafood and other items until April 2.

 

With $1.3 billion in exports in 2024, China is Canada's second-largest market for fish and seafood, according to federal data. Lobster ($569 million), crab ($300 million), and prawns ($262 million) were Canada's top seafood exports to China in 2023, making up 78 per cent of all seafood exports to China.

 

The double whammy of China and US tariffs for Canada 

Adding to the pressure, on March 4, the US administration under Donald Trump imposed a 25 per cent tariff on nearly all Canadian and Mexican imports, with a lower 10 per cent tariff on Canadian energy. However, following market turmoil, Trump signed an executive order delaying these tariffs until April 2 for products such as seafood that meet USMCA rules-of-origin requirements.

 

China’s decision to impose tariffs follows a pattern of targeting sensitive Canadian exports. The country previously restricted canola exports in 2019, widely seen as retaliation for Canada’s detention of Huawei executive Meng Wanzhou at the request of US authorities. China is a crucial market for Canadian canola, with exports valued at nearly $5 billion. The Canola Council of Canada has expressed concern, stating that the new tariffs are prohibitively high and will significantly impact the industry.

 

Beijing has justified its latest measures by stating that Canada’s October tariffs violate World Trade Organization (WTO) rules and constitute protectionism. According to Canadian government data, rapeseed (canola) is the country’s second-largest crop, generating C$13.6 billion in sales in 2023. In 2024, Canadian exports of canola meal and oil to China totaled C$920.9 million and C$21 million, respectively, while pea exports reached C$303 million.

 

China’s announcement comes amid broader global trade tensions, with the US recently doubling tariffs on Chinese imports to 20 per cent. Meanwhile, the Trump administration has temporarily exempted Canadian and Mexican auto and agricultural products from new tariffs, provided they meet USMCA rules.

 

US imposes tariffs on Canadian imports 

The United States has also imposed tariffs on Canadian imports, further straining trade relations. On February 1, 2025, President Trump signed executive orders imposing a 25 per cent tariff on most Canadian imports, with energy products taxed at 10 per cent.

 

On March 11, 2025, Trump initially announced plans to increase tariffs on Canadian steel and aluminum to 50 per cent, but later reversed the decision, maintaining the 25 per cent tariff. The tariffs were justified by concerns over trade imbalances and border security issues, including drug smuggling.

 

In response, Canada imposed a 25 per cent duty on $30 billion worth of US goods on March 4, 2025, with plans to expand this to $155 billion if US tariffs remain in place. These tariff announcements have caused market volatility, triggering stock market declines following major developments.

 

What will be the economic impact of the US-Canada trade dispute? 

The escalating trade dispute between Canada and the US has raised economic risks for both nations, affecting growth, inflation, employment, and key industries. Analysts warn that prolonged tariffs could push Canada into a recession.

 

RBC projects zero GDP growth in 2025 and a 2 per cent contraction in 2026. With exports to the US accounting for C$412.7 billion in 2024, or 20 per cent of GDP, key sectors like auto manufacturing and energy are at risk. The auto industry, which generates Canadian $185 billion annually, faces severe disruptions due to cross-border supply chain issues. Canada could lose up to 1 million jobs, particularly in Ontario and Quebec’s manufacturing sectors, which contribute about 10 per cent of GDP.

 

Strain on auto, energy sector and job losses loom for Canadians 

The energy sector, which supplies 60 per cent of US crude oil imports and 99 per cent of its natural gas imports, is also vulnerable, as a 10 per cent tariff on Canadian energy exports could significantly impact Alberta’s economy. In response to US tariffs, Canada has imposed 25 per cent duties on $30 billion of US goods, with plans to expand this to $155 billion if the dispute continues.

 

Given that Canada and the US trade $2.5 billion daily, prolonged tariffs could be mutually damaging. A weaker Canadian dollar might offset some tariff impacts but could also lead to inflation. Meanwhile, uncertainty surrounding Trump's future tariff policies has exacerbated market volatility.

 

The job losses due to US tariffs on Canada are expected to be substantial. The manufacturing sector, particularly the auto industry, could be hit hardest, with over 125,000 workers affected if factories shut down due to supply chain disruptions. The energy sector could see thousands of jobs lost in Alberta and other oil-producing provinces.

 

Higher costs from tariffs could also slow down construction projects, leading to job losses in an industry employing 1.6 million people. Reports suggest that Ontario and Quebec, with their manufacturing-heavy economies, are expected to bear the brunt of job losses, while Nova Scotia has already seen employment stagnation, with minimal job growth in early 2025. Indirect job losses and reduced consumer spending could further deepen the economic downturn.