Trump seeking trade leverage over Canada with new targeted tariffs: analysts

Removing that exemption represents a “marked escalation” in U.S. trade aggression, said Royce Mendes, head of macro strategy at Desjardins.

“That being said, when you look at what’s being covered … it’s certainly not broad-based in nature. It’s more targeted,” he said.

A number of economists, including Mendes, suggest the new duties will hit around five per cent of Canada’s exports to the United States.

BMO senior economist Robert Kavcic said in a note to clients that the proposed tariffs would cover roughly $28-billion worth of annual Canadian exports to the United States. That amounts to 0.8 per cent of Canada’s gross domestic product, he said.

Kavcic said it appears that chemicals, plastics, electronics and industrial equipment are the biggest targets, followed by consumer goods and forestry products. Miscellaneous manufacturing machinery and agricultural or food products round out the list.

Mendes said areas previously targeted in Trump’s tariff agenda would see more pressure in the latest round of duties. That means already hard-hit provinces like Ontario would see steeper impacts.

The Trump administration has cited Canada’s supply managed dairy industry, provincial bans on U.S. booze and quotas on the American automotive sector to justify the new tariffs.

U.S. Trade Representative Jamieson Greer said in an interview with CNBC on Tuesday that the new tariffs are a “natural consequence of the Canadian retaliation.”

Unifor national president Lana Payne said in a statement Tuesday that the Trump administration’s latest threatened round of tariffs appears intended to divide Canadians and the provinces.

“We cannot underestimate the potential threat of Donald Trump’s bully tactics as he attempts to drive wedges between provinces and force us into submission,” she said. “The provincial and federal governments must stand firm and unite to protect jobs and Canada’s interests.”

Canada’s current effective U.S. tariff rate — a measure of the average level of duties across Canadian exports — will likely rise a few percentage points if the new tariffs take effect as planned on Aug. 19. The economists weighing in Tuesday estimated the new effective tariff rate somewhere in the mid-to-high single digits.

Kavcic said that level is digestible for the entire economy but some specific businesses and industries will be hit “extremely hard.”

“And if the shelter of (CUSMA) is in fact broken, that would do serious further damage to business confidence,” he said.

Mendes said even taking the new duties into account, Canada remains in a relatively favourable trade situation with the United States compared to some other countries. He also agreed that business confidence is the “key channel” to watch in the wake of Trump’s tariff threats.

“What’s really difficult here is that we are going through another phase of uncertainty for businesses, which will then have knock-on effects for households who are worried about their job prospects,” he said.

The United States opted earlier this month not to renew CUSMA for another 16-year period, taking the North American trade pact to rolling annual reviews.

Mexico and Washington have launched official negotiations but Ottawa has not yet started trade talks with the U.S.

“The timing is also notable, and it is likely these tariffs will serve as additional leverage in upcoming CUSMA negotiations,” wrote CIBC deputy chief economist Benjamin Tal in a note to clients Tuesday.

Canada’s broader efforts to get tariffs removed on key industries like steel and aluminum have stalled since late last year.

Prime Minister Mark Carney said he spoke to Trump on Tuesday morning and they agreed to intensify trade talks in the coming weeks.

The tariffs themselves may be designed to spur concessions rather than meaningfully disrupt the North American economic landscape, Mendes said.

Greer suggested Tuesday that the U.S. had the trade talks in mind when it planned the new tariffs.

“Sometimes you take an action that leads to a better negotiation in the end,” he told CNBC. “We will see where it leads.”

With the U.S. heading into midterm elections this fall, Mendes said the president is likely looking to extract a deal that he can present as a political win to American voters.

“This is very much in line with Trump’s signature strategy of trying to deploy maximum leverage on negotiating partners in order to generate some concessions,” he said.

Mendes also said the renewed U.S. trade aggression should give the Bank of Canada an opening to ease its benchmark interest rate.

Inflation data to date has shown little in the way of spillover effects from the Iran war into broader price pressures. Mendes said that gives the central bank more leeway to stimulate economic growth if necessary.

This report by The Canadian Press was first published July 21, 2026.

— With files from Kelly Geraldine Malone in Washington

Craig Lord, The Canadian Press

by The Canadian Press

Trump seeking trade leverage over Canada with new targeted tariffs: analysts

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