A trade conflict between Canada and the United States could mean higher prices for Canadian consumers, according to the Bank of Canada.
The U.S. recently imposed 25% tariffs on goods imported from Canada, and Canada has retaliated with equal tariffs. This back-and-forth affects both countries’ economies, with Canadian households feeling the pinch.
The Bank of Canada has provided extensive information on how tariffs will affect Canadians.
Here’s an example of how it works: Canadian steel used in U.S. auto parts is taxed twice—once by the U.S. government and again when it crosses back into Canada in finished cars. These costs are passed down to consumers, making vehicles more expensive on both sides of the border.
The tariffs also hurt Canadian exports by making them less competitive globally. As demand for Canadian goods drops, businesses cut production and lay off workers, reducing incomes and spending. Meanwhile, imports of machinery and other essentials from the U.S. become pricier due to both tariffs and a weaker Canadian dollar.
For Canadian households, these policies mean fewer job opportunities and rising prices on everyday goods, from cars to groceries. Inflation is expected to rise, while overall economic growth slows.
The Bank of Canada warns that the long-term impacts could be significant, with reduced business investment leading to a permanent Gross Domestic Product decline. While some tariff revenues are given back to households, the extra costs outweigh these benefits, leaving Canadians with less spending power.
This example highlights how interconnected global economies are—and how tariffs ripple through industries, businesses, and everyday life.