Canada’s retaliatory tariffs are exposing an uncomfortable reality for American businesses: some U.S. industries depend almost entirely on Canadian customers for their international sales. A new Atlantic Council analysis, published October 13, 2026, identifies striking vulnerabilities, including Michigan kraft paper exports, Alabama ovens and Wisconsin blue cheese.
Although the United States has a much larger economy, the trade dispute is creating concentrated pressure in American manufacturing and agricultural communities. Canada’s September countermeasures cover C$27.6 billion in U.S. products, with tariff rates reaching 50%.
The findings reveal why relatively targeted tariffs can carry consequences beyond their share of national trade. For certain exporters, Canada is not simply another market. It is the overseas customer that makes much of their export business possible, raising questions about lost orders, higher costs and political pressure as the trade conflict continues.
Canada’s Tariffs Are Targeting American Export Dependence
The Atlantic Council’s October 13 analysis identifies a central vulnerability in the U.S.–Canada trade dispute: American exporters are not equally exposed to Canadian retaliation. Researchers Madeline Chalecki and Delnaz Ghadiali examined trade patterns and found that Ottawa’s countermeasures affect products for which Canada represents an unusually large share of U.S. foreign sales. Even though the tariffs cover a relatively small portion of American exports overall, their effects could be substantial for certain manufacturers and agricultural businesses.
Canada introduced its latest countermeasures on September 8, responding to U.S. tariffs on approximately C$27.6 billion of Canadian goods. Canadian duties of 15%, 25% and 50% apply to selected American products, including steel, dairy, appliances, agricultural equipment, paper and electronics. The strategy increases the cost of targeted American goods entering Canada while attempting to protect Canadian industries from U.S. trade restrictions. The Atlantic Council’s findings suggest the greatest pressure may emerge in specialized industries whose established customers are overwhelmingly located north of the border.
Some Export Categories Depend Entirely on Canada
The most striking finding concerns Michigan’s kraft paper exports, with Canada accounting for 100% of the state’s reported exports in the category examined. Alabama’s oven exports show a similarly concentrated relationship, with 95% going to Canada, while the corresponding figure for Wisconsin blue cheese reaches 88%. These percentages help explain why targeted countermeasures can affect specific businesses even when their contribution to the national economy appears relatively small.
There is an important distinction behind the numbers. A product category sending 100% of its exports to Canada does not mean every manufacturer producing that product sells exclusively to Canadians. Domestic American sales are not included in the export-share calculation, and the figures describe particular products rather than entire state economies. Separate research from the American Action Forum identified 88 detailed U.S. export categories, collectively worth approximately US$10.8 billion, in which Canada accounted for all recorded foreign sales in its dataset. Not every category in that broader study necessarily faces the latest Canadian tariffs, but the concentration reveals how dependent some export relationships have become.
Michigan’s Kraft Paper Exporters Face a Concentrated Risk
Michigan is among the clearest examples of why the trade dispute matters beyond automobile manufacturing. The Atlantic Council found that Canada accounted for all of Michigan’s exports in the kraft paper category it examined. Kraft paper and paperboard are widely used in commercial packaging, shipping materials and industrial applications, connecting paper production with manufacturers, distributors and retailers. Canada’s countertariff list includes certain uncoated kraft paper products at 25%, while specified coated kraft paper categories face duties as high as 50%.
The broader state economy is also closely connected to Canada. U.S. Trade Representative figures identify Canada as Michigan’s largest foreign market, with billions of dollars in annual merchandise exports crossing the border. For a paper producer supplying Canadian packaging companies, a tariff can create a difficult decision: accept lower margins, negotiate price reductions or risk losing future orders to competitors. The Atlantic Council figures demonstrate exposure rather than confirmed sales losses, but they illustrate why manufacturers may view the trade dispute as a direct commercial threat rather than a distant political disagreement.
Alabama’s Oven Industry Illustrates the Consumer Goods Problem
Alabama’s oven exports provide another example of a highly concentrated foreign customer base. According to the Atlantic Council analysis, Canadian buyers account for approximately 95% of the state’s exports in the oven category examined. Canada has included electric ovens, cooking stoves and ranges among products subject to a 25% countertariff, although the exact duty depends on the product’s customs classification. The measures place additional costs on certain appliances imported from American suppliers.
Canada’s importance to Alabama extends beyond individual appliances. U.S. Trade Representative figures show the state exported approximately US$4.3 billion in goods to Canada in 2025, representing 18% of its merchandise exports. A Canadian appliance retailer reviewing its next shipment must consider the final landed cost, not simply the manufacturer’s original price. If a competing product from another country becomes less expensive, purchasing decisions could change. American manufacturers may respond with discounts or absorb part of the added expense, but either option can weaken profitability when sustained over multiple orders.
Wisconsin’s Blue Cheese Producers Are Especially Exposed
Wisconsin’s dairy industry has a strong international presence, and its connection to Canada is particularly significant for certain specialty products. The Atlantic Council estimates that 88% of Wisconsin’s blue cheese exports go to Canadian buyers. Canada’s current countertariff schedule applies a 25% surtax to blue-veined cheese and related products. For producers selling specialized cheeses through Canadian wholesalers, restaurants or retailers, the additional import cost introduces uncertainty into established distribution relationships.
Wisconsin’s Department of Agriculture, Trade and Consumer Protection reported approximately US$1.38 billion in agricultural, forestry and food exports to Canada in 2025, making it the state’s largest agricultural export destination. The figure covers far more than cheese, but it illustrates the commercial importance of Canadian customers. Specialty dairy producers often compete through quality, established buyer relationships and recognizable regional products. Tariffs can disrupt that balance by making imported cheeses more expensive compared with alternatives already available in Canada. The result is not necessarily an immediate disappearance of sales, but weaker negotiating power and greater uncertainty for producers deciding how much inventory to prepare for export.
Even Toilet Paper Is Caught in the Trade Dispute
The impact is not limited to expensive machinery or specialized agricultural products. The Atlantic Council analysis highlights toilet paper as another example of concentrated export dependence, estimating that Canadian demand accounts for more than 75% of American foreign sales in the category. Canada’s countertariff schedule applies a 25% duty to U.S.-origin toilet paper. Related paper products face different rates, with certain tissue stock and packaging materials subject to tariffs of 50%.
For an American tissue manufacturer, the issue is less dramatic than it might appear on a supermarket shelf but potentially serious for commercial planning. Paper products are bulky, transportation costs matter, and producers often depend on consistent orders to keep manufacturing equipment operating efficiently. A Canadian distributor facing higher import costs could negotiate discounts, increase prices or seek alternative suppliers. Canadian manufacturers may benefit from reduced price competition, while Canadian shoppers could face higher costs where substitutes are limited. The example shows how tariffs on everyday essentials can reach beyond the industries usually associated with international trade disputes.
North Dakota and Pennsylvania Show How Exposure Spreads
Some states depend heavily on Canada across their entire export economies rather than just a few specialized products. North Dakota stands out. According to the U.S. Trade Representative, the state exported approximately US$7 billion in goods to Canada in 2025, representing 81% of its total merchandise exports. Petroleum products, machinery and agricultural goods contribute to its broader international trade. That does not mean 81% of the state’s exports face Canadian countertariffs, but it demonstrates the economic importance of maintaining access to Canadian buyers.
Pennsylvania is another significant example. U.S. government data show that approximately US$14 billion in Pennsylvania goods exports went to Canada in 2025, accounting for 27% of its total exports. The Atlantic Council also identifies Pennsylvania, Texas and Illinois as states where the current retaliation creates notable industrial exposure. Their economies are larger and more diversified than North Dakota’s, but particular manufacturers can still depend heavily on cross-border business. The effects of tariffs therefore vary considerably by location, product and company, complicating attempts to describe the trade war using national averages alone.
Canadian Importers Pay the Tariffs, but American Exporters Feel the Pressure
The financial mechanism behind Canada’s retaliation is important. Canadian tariffs are collected by the Canada Border Services Agency from importers bringing covered U.S.-origin products into Canada. The tariff does not arrive as a direct tax bill sent to an American factory. For example, the CBSA calculates that a 25% surtax on a shipment valued at C$150 adds C$37.50 in tariff costs before applicable sales taxes are considered. That higher landed cost can change how Canadian businesses decide what to purchase.
The financial burden can then spread across the commercial relationship. A Canadian importer might absorb some of the cost to retain customers, increase its selling price or demand a discount from its American supplier. Research on tariff pass-through has shown that importers and domestic buyers often bear a substantial portion of import duties, although exporters can also suffer through reduced demand. Ottawa maintains a tariff-remission process for exceptional situations, including goods that cannot reasonably be sourced elsewhere. Such relief can limit damage to Canadian manufacturers without eliminating the broader commercial uncertainty for U.S. exporters.
The Economic Consequences Are Becoming Political
With the November 3 U.S. midterm elections approaching, the trade dispute is becoming increasingly relevant to political debates in export-dependent states. The Atlantic Council argues that geographically concentrated tariff costs may influence how candidates discuss economic policy. Michigan offers an example. Republican Senate candidate Mike Rogers publicly called for an end to the U.S.–Canada tariff dispute on October 7, arguing that businesses and consumers need relief from rising costs. Reuters reported that the position represented a departure from his earlier support for much of President Donald Trump’s tariff agenda.
Other lawmakers have raised similar economic concerns. Maine Republican Senator Susan Collins warned in August that the breakdown in negotiations could raise costs for businesses and households in her state. Meanwhile, Associated Press reporting on recent polling found that more than 64% of American adults believed Trump had gone too far with his latest tariffs. The White House continues to defend tariffs as a way to protect domestic industry and strengthen manufacturing. The political debate now involves whether those potential benefits outweigh the costs imposed on exporters, importers and consumers.
Larger Industries Could Face Greater Disruption if Tariffs Escalate
The current retaliation covers many products, but North America’s largest integrated industries remain an even greater concern. Automotive manufacturing is particularly sensitive because vehicles and components routinely cross the Canada–U.S. border during production. Under existing U.S. rules, qualifying North American vehicles receive preferential treatment for their American-made content, while certain CUSMA-compliant auto parts are exempt from the relevant 25% sectoral tariff. Nevertheless, the Atlantic Council reports that the average U.S. tariff rate on Canadian autos and parts climbed from 0.2% in February 2025 to 9.2% in August 2026.
Energy presents another significant area of mutual dependence. Canadian crude supplies are important to American refineries, while Canada remains heavily reliant on the United States as an energy customer. These relationships explain why both governments face substantial risks from broader restrictions. Canada already maintains separate countertariffs on U.S. vehicles, but a further escalation affecting integrated automotive production or energy flows could generate much larger consequences than tariffs on narrower consumer categories. Such outcomes remain possibilities rather than announced changes to every product involved.
The Real Test Is Whether Trade Dependence Turns Into Lost Business
The Atlantic Council’s findings establish where American exporters may be vulnerable, but export concentration should not be mistaken for proof that shipments have already collapsed. Measuring the actual damage requires newer information on sales volumes, prices, customer orders and employment after Canada’s September 8 tariffs took effect. Some companies may absorb higher costs or redirect products to different buyers. Others may find that replacing Canadian customers is commercially difficult, particularly when their products and distribution systems were developed around long-standing cross-border relationships.
The policy outlook remains uncertain. On October 8, U.S. Trade Representative Jamieson Greer said Washington was maintaining its position while continuing senior-level contact with Canadian officials. The United States has also opened public consultations for the 2027 review of CUSMA, with written submissions due January 12, 2027. Those processes provide opportunities to address trade barriers, although they do not guarantee tariff relief. For American businesses dependent on Canadian customers, the immediate concern is simpler: preserving orders, prices and commercial relationships. The research demonstrates that even a much larger economy can have industries exposed when an important trading partner decides to retaliate.
