Washington’s trade fight with Canada moved from tariff schedules into a congressional hearing room on September 15, when U.S. Treasury Secretary Scott Bessent defended President Donald Trump’s strategy under questioning from lawmakers. Bessent said the United States would ultimately secure better trade terms, even as Democratic Representative Sylvia Garcia criticized the escalating dispute and other members of Congress pushed for more oversight of tariff powers.
The clash comes at a sensitive moment. New U.S. duties are hitting selected Canadian goods, further import restrictions are scheduled, Ottawa has answered with counter-tariffs, and the future of the USMCA is being reviewed annually after Washington declined to extend it in its current form. The result is a trade confrontation that is now as much about political authority and industrial strategy as it is about customs rates.
Bessent Makes the Case for Pressure
Bessent’s central argument was straightforward: Washington believes economic pressure can force concessions that ordinary negotiation would not produce. During the House Financial Services Committee hearing, Garcia challenged the administration over the widening conflict with Canada. MarketWatch reported that Bessent responded by saying the United States would end up with better trade terms and pointed to Sapporo Breweries’ plans to shift some production toward the U.S.
That exchange captured the administration’s broader theory of tariffs. The goal is not simply to collect revenue at the border, but to change corporate decisions and strengthen Washington’s leverage over trading partners. Yet Bessent’s statement was a forecast of negotiating success, not evidence that Canada had already accepted new terms. No comprehensive Canada-U.S. settlement was announced at the hearing, and the two governments continue to present sharply different accounts of what would constitute a fair agreement. For Canada, that makes the hearing more than theatre.
Congressional Resistance Is Real, but Not Uniform
The pushback on Capitol Hill is broader than one Democratic lawmaker’s questioning. In late August, Marcy Kaptur and Debbie Dingell led 86 House colleagues in a letter urging Trump to change course toward Canada, warning that tariffs and adversarial rhetoric were creating uncertainty for workers, farmers, businesses and consumers on both sides of the border. The Congressional Research Service has noted concerns among lawmakers about higher costs and instability in the relationship.
Congress is not speaking with one voice. CRS records that some members support using tariffs and the USMCA review as leverage against trade practices, while others have proposed limiting tariff authorities. That split matters because the Constitution gives Congress authority over foreign commerce and duties, though lawmakers have delegated trade powers to presidents over decades. The fight is becoming a debate not only over Canada, but over how much discretion a president should have to impose trade restrictions.
Section 338 Becomes Washington’s New Weapon
The escalation rests heavily on Section 338 of the Tariff Act of 1930, a rarely used statute allowing the president to respond to alleged discrimination against U.S. commerce. CRS says Trump’s 2026 action marked the first time a president expressly cited Section 338 to impose tariffs. After a delay, 50% duties on selected Canadian goods took effect on August 22 following unsuccessful bilateral trade negotiations.
Washington expanded covered product lists in September and announced import bans on certain Canadian alcoholic beverages, dairy products, molasses and motorcycles beginning September 29. The administration argues that Canadian practices in alcohol distribution, dairy access and automotive policy disadvantage U.S. producers. Canada disputes the broader approach and says the measures undermine an integrated trading relationship. Because Section 338 has little modern precedent, its use has intensified questions in Congress about oversight, statutory limits and the balance of trade power between the legislative and executive branches.
Canada Answers Dollar for Dollar
Ottawa’s response has been deliberately targeted rather than economy-wide. Canada imposed counter-tariffs on C$27.6 billion of U.S. goods beginning September 8, with rates of 15%, 25% and 50% depending on the product. The federal government described the package as a dollar-for-dollar, rate-for-rate response to U.S. measures and focused it on sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, electronics and other manufactured goods.
The Canadian government paired those duties with support for affected workers and businesses, arguing that retaliation needed domestic cushioning. That strategy carries its own costs. Import tariffs are paid at the border by domestic importers and can be absorbed through margins, shifted to suppliers or passed into prices. Ottawa has therefore tried to frame its measures as leverage rather than an end in themselves. The practical test will be whether the counter-tariffs change U.S. negotiating incentives without creating larger costs for Canadian firms and households.
Most Trade Still Moves Outside the New Tariff Fight
The scale of the dispute can look larger than the share of commerce currently targeted. U.S. Census Bureau data show that from January through July 2026, the United States exported about US$205.5 billion in goods to Canada and imported roughly US$233.7 billion. That is nearly US$439 billion in two-way goods trade in only seven months, before services are counted.
CRS estimates that Canadian goods covered by the latest U.S. Section 338 actions represented about 5% of U.S. imports from Canada, while Canada’s C$27.6 billion response equaled roughly 6% to 8% of Canadian imports from the United States using 2025 comparisons. Associated Press has reported that more than 80% of trade remains tariff-free. That does not make the dispute trivial. Tariffs can be concentrated in politically and economically important industries, meaning the pain can be severe for particular plants, farms and communities even when most cross-border commerce continues under preferential treatment.
Autos Show Why Simple Winners Are Hard to Find
No sector illustrates North American integration better than automobiles. CRS data show that Canada bought about 38% of U.S. automotive exports in 2025, worth roughly US$61 billion. Canada was also the second-largest foreign supplier of automotive products to the United States, providing about US$53 billion, while 90% of Canadian automotive goods exports went south of the border.
Those numbers explain why trade pressure can produce conflicting effects. Higher barriers may encourage companies to shift assembly or sourcing into the United States, one of the administration’s stated goals. At the same time, vehicles and parts routinely cross the border during production, so tariffs can raise costs inside U.S. factories and in Canada. Ottawa has said it will not accept terms that reduce Canadian industries to subsidiaries of American ones. The unresolved question is whether new rules can increase U.S. production without disrupting regional supply chains that support factories on both sides.
Sapporo Gives Bessent an Example, but With a Caveat
Bessent used Sapporo Breweries as an example of tariffs changing corporate behavior. The Japanese brewer has been examining a shift of some production for the U.S. market from Canada to the United States after Washington imposed steep duties on Canadian-made beer. Reports said Sapporo planned to move production of some non-alcoholic products to the U.S. as it reorganizes its North American operations.
The example is meaningful, but its scale should not be overstated. Sleeman Breweries, Sapporo’s Canadian subsidiary, later said the potential relocation was neither imminent nor finalized and involved Sapporo 0.0% production equal to about 0.5% of Sleeman’s Canadian output. One company’s supply-chain adjustment does not establish the economy-wide result of a tariff policy. It does show how uncertainty can influence investment decisions before a broader trade settlement is reached. For workers and communities in Canada, even small production shifts can carry symbolic weight during a politically charged dispute.
Tariffs Can Move Prices as Well as Factories
The economic argument over tariffs is not limited to jobs and bargaining power. Federal Reserve research on the 2025 U.S. tariff wave found significant price increases for goods with greater tariff exposure. One 2026 Fed study estimated that those tariffs lifted core goods PCE prices by 3.1% through February, while the Fed’s July Monetary Policy Report said tariff increases contributed in part to higher consumer-goods inflation.
Canadian research points in the same direction. A Bank of Canada staff paper examining Canada’s 2025 counter-tariffs found prices of tariffed retail goods rose gradually and peaked about 6% higher after three months, implying roughly one-quarter pass-through of a 25% tariff. Those studies do not directly predict the exact effect of the new 2026 Canada-U.S. measures, which cover different products and legal authorities. They show why lawmakers questioning Bessent are focused not only on negotiating gains, but also on who ultimately bears the cost.
Carney Is Building a Different Kind of Leverage
Prime Minister Mark Carney’s government is responding by trying to reduce Canada’s vulnerability to a single market rather than rushing into a deal. On September 15, Carney told investors that Canada was strengthening domestic capacity and diversifying trade ties. His government says the first Canada Investment Summit generated nearly C$500 billion in investment commitments, while a new “Productivity Mega Deduction” would cut the marginal effective tax rate on new business investment to 6.4%.
Those figures are part of Ottawa’s strategy, and investment commitments are not completed spending. Still, the direction is clear: make Canada more attractive to global capital while expanding ties with Europe and other markets. Associated Press reported that Carney is prepared to wait for conditions he considers acceptable in negotiations with Washington. That contrasts with Bessent’s claim that U.S. pressure will produce better terms, turning the dispute into a test of which side can sustain uncertainty longer.
The Next Battle Is Over the Rules Themselves
The Canada-U.S. dispute now sits inside an argument over the future of the USMCA. At the July 2026 review, the United States declined to extend the agreement in its current form, while Canada and Mexico supported continuation. The agreement remains in force, but the decision triggered annual reviews that can continue until the countries agree on an extension or the pact reaches its 2036 termination date.
That structure gives Congress a role. CRS says lawmakers may consider whether to curb Section 338, require congressional approval for tariff actions, or shape U.S. priorities in USMCA reviews. Other members support tariff pressure to address complaints over dairy, alcohol, autos and other policies. For Canada, that means the dispute is unlikely to be resolved by one meeting or one tariff list. Bessent’s promise of better terms is competing with congressional oversight, Canadian retaliation and a trade framework whose next decade remains deeply unsettled.
