Economic impact of trade war with Canada

EL PASO, Texas (KVIA)-- New tariffs between the United States and Canada could make affordability concerns worse, according to economist Tom Fullerton.

“Households are already complaining about affordability in 2026,” Fullerton said. “And this doesn't do anything to help matters. It exacerbates the problem a little bit.”

In August, the U.S. imposed a 50% tariff on more than $27 billion worth of Canadian goods.

Canada responded with counter-tariffs of up to 50%, targeting about $20 billion worth of U.S. goods.

Fullerton said it is important to consider how much trade is actually affected by the tariffs.

“The total amount of goods being subjected to the new tariffs by both countries represents less than 3% of the total trade between both nations,” he said.

Fullerton said maintaining a strong trade relationship with Canada is important.

Trade allows countries to exchange more goods, potentially giving consumers access to lower prices and a greater variety of products.

“And so, you know, that's sort of the holy trinity of consumer economics and of international trade,” Fullerton said. “And the United States, Mexico and Canada achieve those objectives.”

The bigger concern, Fullerton said, is what could happen if the trade was continues to rage on.

“A trade war is very similar to a shooting war,” he said. “It's easy to get into one, but it's very hard to extricate countries from a trade war once they're embroiled in one.”

Fullerton said a prolonged trade war could ultimately hurt the economy.

“Higher inflation, higher unemployment and negative economic growth,” he said. “And hopefully we will avoid that. But right now, the White House is headed in that direction.”