Exemptions blunt Canada tariff impact
New levies target auto, alcohol, dairy industries
By: Rachel Barber
USA Today
..... Though the Trump administration has announced 50% tariffs on many Canadian imports, exemptions mean the hit to most Americans' budgets is likely to be limited unless they buy targeted goods affected by the new duties, economists say.
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President Donald Trump said on July 20 [2026] that he is using Section 338 of the Tariff Act of 1930 to impose the tariffs in response to what the administration calls discriminatory Canadian trade practices against the United States, particularly its auto industry. The tariffs are scheduled to take effect on August 19, [2026] but Canadian Prime Minister Mark Carney has singled he is open to negotiations, so the final rate and scope could still change.
..... Canada 'stands ready to engage intensively" with U.S. negotiators to come to an agreement "to the mutual benefit of our citizens," Carney said in a July 20 [2026] statement.
..... Tariffs are a tax on goods imported into the United States. They have become a defining feature of Trump's economic agenda in his second term, even as they have faced several legal challenges. Although the Supreme Court ruled against many of the sweeping tariffs Trump announce din April 2025 and forced some refunds, the administration has continued to look for ways to implement similar import taxes.
..... The new levies will primarily impact goods flowing into the United States from Canada's auto, alcohol and dairy industries.
..... Alongside Trump's proclamation, the White House released an 18-page list of hundreds of Canadian imports that will be affected by the new 50% tariff. The list ranges from honey and flowers to plywood and clothes.
..... However, oil, natural gas, critical minerals and other Canadian products are exempt.
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Although Canada is the United States' second-largest trading partner, those exemptions limit tis round of tariffs' impact to about 5% of the $382 billion in Canadian imports to the United States recored in 2025, according to Brian Therien, a senior analyst at Edward Jones.
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Many U.S. home building materials have historically come from Canada, so a 50% tariff could raise the cost of some key inputs and make an already-tough process of building new homes in the United States a more expensive task, according to James Knightley, chief international economist at Dutch bank ING.
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"It's more pressure on the home builders themselves," Knightley said. "Just squeezing their margins a little bit more."
..... U. S.-based importers pay the cost of tariffs on incoming goods, often before selling the goods to retailers who then sell to consumers. Along the way, a passed on. When Trump in April 2025 announced tariffs on imports from a host of nations worldwide, economists were concerned that they would meaningfully raise prices for U.S. consumers.
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"That was when, of course, we were talking about tariffs of 30% to 50%," Knightley said, adding the U.S. effective tariff rate was about 2.5% before Trump retook office in 2025. "But as we saw, the administration swiftly changed those tariffs rates, and we settled at an average tariff rate of about 16% to 17%, yet the actual realized rates undershot expectations."
..... About a year later, [2026] Federal Reserve Bank of Dallas researchers have an answer. They estimated that year-over-year core Personal Consumption Expenditures -a measure of inflation - would have been 2.3% in March 2026 had it not bee for tariffs. Instead, it was 3.2%.
..... "We're seeing about 25% of the inflation coming from tariffs," said Shikha Jain, a Simon-Kucher partner and lad of the consumer sector for North America. typical year-over-year inflation and price increases yield to the Iran war make up much of the rest,she said, but "a lot of other businesses sue tariffs as the reason or as the excuse to take prices up, and it's easy for consumers to have something to blame."
..... Jain said if this new round of tariffs on Canadian imports does take effect August 19, [2026] she expects most retailers will pass cost increases to consumers over the next three to four months.
..... "However, the flip side to this is that we know when there are very severe price hikes, or at least a 20% increase in discretionary pricing, about 20% of consumers stop purchasing all together,' Jain said.
.....She added that businesses will carefully weigh price increases because if they get "too high, they might not be able to move product."
..... So, are tariffs inflationary?
..... "The short answer is yes. Tariffs cause inflation. They are inflationary by nature," said Per Hong, partner and global lead of Kearney Foresight, an internal think tank within management consulting firm Kearney.
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He added that supply chains are also "adaptive in managing and mitigating the impact of that."
..... Knightley said because tariffs are typically challenged in court once they take effect, a lawsuit is unlikely to stop the Trump administration from implementing them.
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"It's more about whether enough concessions are achieve to get it moderated," he said. "For me, I think it unlikely that we will see a meaningful reduction."
..... The Trump administration is also working to implement tariffs, several other ways under different authorities. Drew DeLong, head of corporate statecraft for Kearney Foresight, said he would be surprised if the U.S. effective tariff rate were not higher at the end of 2026 than it was at the end of 2025.
..... Jain said average Americans consumers should expect prices to keep rising, whether because of tariffs, limited oil supply tied to the Iran war or something else.
..... "It's going to be difficult for us to sue a world where we get stable prices in the next three or four years," she said.