USMCA Continues to Shield Canada from the Worst of Trump's Trade Wars

Strategic Insights -

Canada's merchandise trade deficit with the world widened to $5.9-billion in June, but the country's position is relatively enviable due to the protection afforded by the USMCA. While exports fell 12.5% from the same month in 2024, primarily due to sectoral tariffs on autos, steel, and aluminum, the USMCA exemptions continue to shield the country from the worst of Trump's trade wars. The concentrated pain is being inflicted on a handful of industries, with aluminum and steel products accounting for nearly two-thirds of all U.S. duties on imports from Canada in June.

Key Takeaways:

  • The USMCA protection has shielded Canada from the worst of Trump's trade wars, with 92% of imports from Canada entering the country duty-free in June.
  • Aluminum and steel products alone accounted for nearly 60% of the $710-million in calculated duties collected by Washington in June.
  • The concentrated pain is being inflicted on a handful of industries, including autos, steel, and aluminum, with total exports of unwrought aluminum and iron and steel products falling by over 11% in June.
  • The USMCA exemptions do not apply to the President's sectoral tariffs on aluminum, steel, and autos, although a carve-out exists for the value of U.S. auto parts in Canadian-made vehicles.
  • Economists warn Canada's low tariff rate is being skewed by shifting trade flows, with U.S. importers cutting back on Canadian goods that carry higher duties.
  • The USMCA protection, alongside evidence that the U.S. tariffs are hitting the job market, has shifted the narrative on the Canadian and U.S. economies from earlier this year.
  • Mr. Trump's sector-specific duties are hammering U.S. manufacturers that import many of their parts and raw materials from Canada.

Statistics:

  • Canada's merchandise trade deficit with the world widened to $5.9-billion in June.
  • Exports from Canada to the U.S. actually increased in June by 3.1% from the month before, owing largely to higher prices for oil.
  • Exports plunged 12.5% from the same month in 2024.
  • Total exports of unwrought aluminum and iron and steel products both fell in June by more than 11%.
  • Aluminum and steel products alone were responsible for just under 60% of the $710-million in calculated duties collected by Washington in June.
  • The USMCA exemptions do not apply to the President's sectoral tariffs on aluminum, steel, and autos.
  • 92% of imports from Canada entered the country duty-free in June.

Sources:

  • "Canada's merchandise trade deficit widens to $5.9-billion in June" by Statistics Canada, July [no date mentioned]
  • "U.S. Census Bureau numbers released Tuesday"
  • "The Aluminum Association of Canada"
  • "Globe and Mail analysis"
  • "Nathan Janzen, assistant chief economist with Royal Bank of Canada"
  • "Shelly Kaushik, senior economist at Bank of Montreal"
  • "Bank of Canada"
  • "U.S. Census Bureau"
  • "Ford Motor Co."