For months, Canada’s trade relationship with the United States has been overshadowed by accusations that Ottawa unfairly restricts American products. However, an economic comparison challenges one of the central arguments surrounding the escalating tariff dispute.
According to calculations by Oxford Economics highlighted by The Associated Press, Canada’s effective tariff rate on American imports stood at approximately 2.4% before trade negotiations collapsed in August 2026. The corresponding U.S. rate on Canadian goods was roughly 5%, more than twice as high.
The findings complicate claims that Canada was broadly imposing heavier import taxes on its southern neighbour.
Importantly, these figures describe the period before the latest escalation, not the years before the wider trade war began in 2025. They also reveal a distinction between Canada’s relatively open overall market and the substantial protections maintained for certain industries, particularly dairy.
Oxford Economics Finds Canada Imposed Less Than Half the American Tariff Rate
The comparison offers a revealing perspective on the increasingly contentious Canada-U.S. trade relationship. Oxford Economics calculated that Canada’s effective tariff rate on American imports was approximately 2.4% before the August 2026 breakdown in negotiations. Meanwhile, the United States imposed an effective rate of about 5% on Canadian goods. In practical terms, the average American tariff burden was more than double Canada’s, even though Washington had repeatedly criticized Ottawa for maintaining unfair trade barriers.
These figures represent broad effective rates rather than the duty charged on every individual product. Some goods entered both countries without tariffs, while others faced substantial import taxes. Nevertheless, the comparison undermines the idea that Canada was consistently charging Americans more across the entire trading relationship. It also highlights the importance of examining actual trade flows rather than focusing exclusively on politically sensitive products. Oxford Economics’ findings, reported by The Associated Press, provide a different starting point for evaluating whether the two countries had been treating each other fairly before their latest confrontation.
The Timing Matters Because Tariffs Were Almost Zero Before 2025
The distinction between the original trade-war period and the latest escalation is essential. Bank of Canada estimates show that before 2025, the average American tariff rate on Canadian goods was approximately 0.1%, while Canada’s average rate on American imports rounded to 0.0%. Both countries therefore maintained exceptionally low bilateral tariffs under North America’s longstanding free-trade arrangements. The 2.4% and 5% figures highlighted by Oxford Economics reflect a later period, after the two governments had already introduced significant trade restrictions.
The Bank of Canada’s July 2026 Monetary Policy Report provides another useful comparison. It estimated the U.S. average tariff rate on Canadian goods at 5%, while Canada’s rate on American imports was approximately 1.5%. That Canadian estimate differs from the Oxford Economics figure because calculations can use different time periods, data and adjustments. However, both comparisons point in the same direction: Canada faced a higher average tariff burden when selling goods to the United States. The numbers also demonstrate how dramatically bilateral trade conditions had changed since the beginning of 2025.
North America’s Trade Agreement Had Already Eliminated Most Import Duties
Canada’s relatively low tariffs are closely connected to decades of regional trade liberalization. The original Canada-U.S. Free Trade Agreement entered into force in 1989, followed by the North American Free Trade Agreement in 1994. Those arrangements were eventually replaced by the Canada-United States-Mexico Agreement, known as CUSMA in Canada and USMCA in the United States, which took effect on July 1, 2020. The agreement preserved duty-free treatment for qualifying goods and established common rules governing their eligibility.
The system helped businesses organize manufacturing and distribution across international borders. An automotive component manufactured in Ontario, for example, could be shipped to an American assembly plant as part of a larger North American production process. To qualify for preferential treatment, however, goods must satisfy rules of origin and other applicable requirements. The agreement does not automatically eliminate every possible tariff or trade restriction. Following the unsuccessful July 1, 2026 joint review, CUSMA remained legally in force, but the countries moved toward annual reviews rather than securing a new 16-year extension. That uncertainty has become increasingly important for companies planning long-term investments.
Effective Tariff Rates Can Hide Important Differences Between Industries
Understanding the tariff comparison requires distinguishing between an average rate and the tariff applied to a particular product. Economists generally calculate trade-weighted tariff averages by considering the duties associated with different products and the value of goods traded. An expensive category accounting for billions of dollars in imports can influence the national average much more than a small category with a very high tariff. As a result, an average of 2.4% does not mean that every American product faced a 2.4% duty when entering Canada.
Other technical factors can also produce different estimates. The Bank of Canada calculates average rates using product-level trade weights and incorporates exemptions under CUSMA. Its methodology also adjusts Canada’s estimates for tariff remissions, which can relieve eligible businesses of certain charges. In October 2025, the central bank estimated Canada’s average tariff on U.S. imports at 1%, but said it would have been approximately 2.4% without accounting for remissions. Its calculation also excluded separate anti-dumping and countervailing duties. These distinctions help explain why comparisons from reputable organizations may differ without necessarily contradicting one another. They also show why a single national average cannot fully capture the experience of every importer or exporter.
Canada’s Dairy Tariffs Remain a Major Exception to Its Open-Market Reputation
Although Canada maintained relatively low tariffs overall, its dairy sector has long been a source of American frustration. Canada’s supply-management system regulates domestic production and uses tariff-rate quotas to control certain imports. Within permitted quantities, eligible dairy products can enter at low or preferential rates. Once imports exceed the applicable quota, however, substantially higher duties apply. Canada’s 2026 customs tariff schedule lists an over-quota duty of 245.5% on several cheese categories and 298.5% on butter.
The Trump administration has repeatedly cited these restrictions as evidence of unfair Canadian trade practices. In July 2026, the White House also accused Canada of treating American cheese exporters less favourably than European competitors through its quota-allocation system. Ottawa’s approach remains controversial, but high statutory tariffs do not mean every American dairy shipment pays those rates. The United States already sells substantial quantities of dairy products to Canada. According to U.S. Department of Agriculture figures reported by The Associated Press, American dairy exports to Canada reached approximately US$1.3 billion in 2025, compared with about US$585 million in Canadian dairy exports to the United States. The dispute therefore concerns market access and specific protections, rather than a complete prohibition on American dairy products.
America’s Trade Deficit With Canada Is Heavily Influenced by Energy Purchases
Another major source of tension is the American trade deficit with Canada. President Donald Trump has repeatedly presented trade deficits as evidence that foreign countries benefit unfairly from their commercial relationships with the United States. However, the composition of Canada’s exports complicates that argument. The United States recorded a goods trade deficit of approximately US$27.3 billion with Canada in 2025, while purchasing more than US$85 billion worth of Canadian crude oil.
Canada plays an important role in supplying American energy markets. According to the Canada Energy Regulator, Canadian producers supplied approximately 63.4% of U.S. crude oil imports in 2025. Many American refineries, particularly in the Midwest, rely on the types of heavy crude produced in Alberta. Replacing those supplies would require alternative sources, transportation arrangements and potentially expensive refinery adjustments. This relationship helps explain why American purchases from Canada can exceed Canadian purchases from the United States without necessarily indicating unfair tariff treatment. The trade balance reflects the products each country needs, how much consumers and businesses purchase, and the structure of their economies. Tariffs are only one part of that calculation.
Steel and Automotive Tariffs Have Created Some of the Greatest Disruptions
The relatively low national tariff averages conceal severe difficulties in particular industries. Steel, aluminum and automobiles have been especially vulnerable to American trade restrictions. During 2025, the United States imposed tariffs reaching 50% on many steel and aluminum imports. Special measures also affected vehicles and automotive components, with treatment depending on factors including the amount of non-American content and compliance with CUSMA requirements.
Additional restrictions expanded the pressure in 2026. Research published by the Federal Reserve Bank of Chicago examined three U.S. tariff proclamations covering 569 eight-digit customs categories. The researchers calculated that the affected goods represented approximately US$24 billion in annualized Canadian imports, equivalent to about 5.5% of American imports from Canada based on May 2026 data. The targeted products extended beyond vehicles and dairy to include furniture, agricultural goods and other manufactured items. These figures illustrate how tariffs imposed on a relatively small share of total trade can still affect many individual businesses. Manufacturers in Ontario and Quebec may face reduced orders, while their American customers must decide whether to absorb higher import costs or seek alternatives.
Failed August Negotiations Triggered Another Round of Tariffs
Canada’s tariff relationship with the United States deteriorated sharply after bilateral negotiations broke down on August 21, 2026. Washington subsequently imposed additional 50% tariffs on selected Canadian products. According to the Canadian government, the measures affected approximately C$27.6 billion worth of Canadian goods. Ottawa responded by announcing countermeasures covering a comparable value of American imports, with new duties taking effect on September 8.
The Canadian measures introduced product-specific tariffs of 15%, 25% and 50%, affecting categories including steel, dairy, household appliances, agricultural equipment, pulp and paper, and electronics. The higher rates were targeted rather than universally applied to all American imports. Oxford Economics had warned on August 28 that the latest U.S. measures would raise America’s effective tariff rate on Canadian exports from approximately 5.1% to 6.9%. Its scenario analysis also suggested that proportionate Canadian retaliation could push Canada’s average rate above 6%. Those figures were estimates based on the announced escalation, not verified measurements of every duty collected afterward. Nevertheless, they show how quickly a previously low-tariff trading relationship can become substantially more expensive.
Research Shows American Businesses and Consumers Also Bear Tariff Costs
Tariffs are frequently described as charges imposed on foreign countries, but the financial process is more complicated. In the United States, importers generally pay customs duties when eligible goods enter the country. Businesses then decide whether to absorb those costs, negotiate lower prices with suppliers or increase the prices charged to customers. Foreign exporters can bear part of the burden through reduced margins, but the assumption that they pay the entire tariff does not match the evidence from recent economic studies.
Research by economists at the Federal Reserve Bank of New York provides a useful example. A study revised in September 2026 examined the effects of recent American tariffs and estimated that approximately 26% of tariff increases passed through to consumer prices for the goods studied. Of that consumer-price effect, around 64% came directly from higher prices for imported varieties, while 36% resulted indirectly from increased production costs and reduced competitive pressure. The researchers found that some indirect effects took nine to twelve months to emerge. For American manufacturers purchasing Canadian steel, equipment or other components, that means tariffs can influence expenses long after the initial customs payment.
Canada’s Latest Trade Figures Show How Companies Are Responding
Recent Canadian trade data demonstrate how quickly businesses can adjust their purchasing decisions when new tariffs are announced. On October 6, Statistics Canada reported that the country’s merchandise exports increased 2.5% in August 2026, reaching approximately C$77.9 billion. Imports fell 2%, producing an overall merchandise trade surplus of C$4.2 billion. Exports to the United States rose an even stronger 8.1%, while imports from American suppliers declined 2.5%.
The result was a significant improvement in Canada’s bilateral goods trade balance. Its surplus with the United States widened from C$6.1 billion in July to C$11.2 billion in August. However, Statistics Canada cautioned that the announcement of new tariffs may have encouraged American importers to accelerate shipments before higher duties took effect. Consequently, the increase should not automatically be interpreted as lasting growth in demand for Canadian products. Earlier annual data showed Canadian merchandise exports to the United States declining during 2025, illustrating the broader disruption associated with the trade conflict. The coming months will provide a clearer indication of whether August’s stronger shipments represented genuine commercial momentum or a temporary rush to avoid additional import costs.
The Economic Stakes Extend Beyond Which Country Charged Higher Tariffs
The tariff comparison arrives at a critical moment for the future of North American trade. On October 8, U.S. Trade Representative Jamieson Greer indicated that Washington was maintaining its negotiating position toward Canada, even as communication continued between senior officials. CUSMA remains in force, but the absence of an agreed extension and the persistence of sector-specific tariffs have created uncertainty for manufacturers, agricultural producers and investors.
Oxford Economics has warned that the consequences of a prolonged breakdown could extend beyond immediate tariff payments. In an August 2026 study commissioned by the Canadian American Business Council, the firm examined scenarios ranging from a successful renegotiation to a complete breakdown of the continental trade agreement. Its findings emphasized the potential for lasting losses in manufacturing-intensive regions, where supply chains and investment decisions can be difficult to reverse. The earlier tariff comparison does not establish that every Canadian trade policy was fair or that American complaints lacked merit. It does, however, challenge the broader claim that Canada consistently imposed higher tariffs on American goods. With both countries now imposing much more substantial restrictions, the pressing economic question is no longer simply who charged more in the past, but how much additional disruption their businesses and consumers can withstand.
