The NPR Politics Podcast - What a trade war with Canada means for U.S. consumers

Episode Date: August 25, 2026

After President Trump announced new tariffs on some Canadian goods, Canada's prime minister, Mark Carney, said his country would match them "dollar for dollar." We look at what's behind the escalation, and the economic & political impacts it will have on the U.S. economy.This episode: voting correspondent Miles Parks, White House correspondent Emily Feng, and chief economics correspondent Scott Horsley.This podcast was produced and edited by Casey Morell and Bria Suggs.Our executive producer is Muthoni Muturi.Support public media with NPR+ and enjoy perks for over 25 podcasts like this one. This show’s perks include bonus episodes and sponsor-free listening. Learn more at plus.npr.org.See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

Trade talks between the United States and Canada have broken down. And Canada's prime minister, Mark Carney, is defying President Trump in a way few world leaders have during the president's second term. Last spring, I warned that America is trying to break us so they can own us. And I promise that that will never, ever happen. But is another terror for really what midterm voters are hoping for? It's the NPR Politics Podcast. We're recording this at 1238 p.m. on Tuesday, August 25th, 2026. I'm Miles Parks. I cover voting.

I'm Emily Fang. I cover the White House. And NPR's chief economics correspondent, Scott Horsley, is also with us. Hi, Scott. Always good to talk trade with y'all. Yes, always good. You know, we have a trade war every other week, it feels like. So, you know, it's a lot of Scott Horsley these days. But, Emily, I want to start with you just to walk us through this tip for tat with Canada,

which seems to be escalating. every few hours at this point. Where did this all start and how do we get to this point? Yeah, there's been this really complicated like side quest in addition to all the tariffs. The U.S. has been pointing on other countries. But it begins right at the start of Trump's second term. So he comes out and he accuses Canada of looking the other way when illicit fentanyl is being trapped across the border from Canada to the U.S. So he slaps tariffs on Canada, even though drug trafficking experts say that that just didn't comport with what was happening on the ground. Then in March you had U.S. tariffs on Canadian steel and aluminum.

And then the big so-called Liberation Day tariffs, which affected a lot of the world, including Canada. And each time there were American tariffs on Canada, Canada retaliated in kind, but through pretty carefully calibrated retaliatory tariffs that never exceeded what the U.S. put on Canada. And then this July, Trump said, we're going to come out with even more tariffs, 50% tariffs in August on about $28 billion worth of Canadian exports. to the U.S. And Trump and the U.S. Trade Representative Office's rationale for these tariffs were that there were discriminatory Canadian protections on American dairy and autos and liquor going to Canada. Scott, can you dig in a little bit more to these tariffs in terms of what actual products are going to be impacted by these? Yes. So the Trump administration has announced taxes on things like hockey equipment that we import from Canada and Canadian whiskey.

Canada outlined their retaliatory tariffs today, and those are set to go into effect right after Labor Day, they want to tax U.S. motorcycles and washers and dryers and cheese. None of this is really at the heart of the trading relationship. You know, these are relatively small slices of the overall commerce between the U.S. and Canada. But it really is another fault line in what for decades has been a very mutually beneficial economic partnership. And the president's driving a wedge there. And the concern, I think, is that it could really spiral into a larger trade war. Yeah, I guess I am wondering if we can dig into that a little bit more about where this is all headed. Bigger picture when it comes to the United States and Canada's close working relationship.

Emily, do you have any thoughts there? I think a really good example is auto parts that have been central to tariff spats between the U.S., mostly on the U.S. side towards Canada over the last year and a half. So a lot of these are exempted under this broad North American free trade agreement called the USMCA. But Trump has threatened to put 50% tariffs on Canadian autos and auto parts come this January if there isn't a resolution to this spiraling trade war. And previously, you know, there could be American auto parts that were made here in the U.S. shipped to Canada, assembled in a Ford car in Canada, and then bought by an American consumer here. And all of that would happen duty-free. It was mutually beneficial to both countries. It employs workers in both countries. That's on the line here. But that's just how integrated the two economies are. And that free trade agreement I just mentioned, that's up for renewal. You know, the U.S. has declined to automatically renew it. It's reviewing the trade agreement. That review can take up to a decade. But that's a huge amount of trade uncertainty for businesses in both Canada and the U.S. We should say that USMCA was actually, you know, a renegotiation of NAFTA. And the USMCA was negotiated during President Trump's first term in the White House.

And he touted it back then as an enormous success as the greatest trade agreement ever. And now he is poking holes in it. I guess I'm still a little bit unclear, Scott, when you mentioned the list of goods, you start with hockey equipment. I'm a little unclear on how this is actually going to impact everyday Americans. Like this escalation this week is our everyday. Americans going to feel it when they go to the supermarket this upcoming week, for instance? You know, there's a lot of symbolism here. When we go after hockey sticks, I mean, that sort of speaks to Canadian culture. When they target motorcycles, that goes right to the heart of Harley

Davidson, you know, a symbol of American manufacturing excellence. But this is still sort of at the symbolic level. The real problem would be if the USMCA itself falls apart. And the decades of investment that businesses have made on the assumption that commerce would flow freely between the U.S. and Canada if that's really called into question here. That hasn't happened yet, but that's certainly sort of the tone that we're hearing from the two sides right now. Are we hearing from businesses, I guess, that are feeling uneasy at this point, Emily, about this escalation? Very much so. So, for example, American liquor has been basically boycotted by Canadian businesses for months now, even before this latest round of tariffs. And I spoke to

one American bourbon maker based in Iowa. The founder's name is Jeff Quinn, and he's situated in this idyllic plot covered with cornfields. And he spoke to me about just how much instability he's facing when trying to make decisions about where to export. It takes some years to build a market, you know, to literally have events, get to know your customers in other countries. He was doing that in Canada because he lost his European market, also due to American tariffs and retaliatory tariffs from the EU on American bourbon years ago. And he developed this Canadian market only to lose that. He says he now has basically zero Canadian customers. And he's just not sure about how the future of trade with Canada is going to look.

He's hoping the U.S.MCA gets renewed. But he also points out even under the current U.S.MCA goods that were supposed to be exempted from customs levies, had American tariffs put on them in the last year and a half. So even that is not sacrosanct. I'm also curious about the president's style here. because him and his administration have been very antagonistic to Canada. I mean, he's repeatedly threatened to take over the country to make it the 51st state. Just yesterday in Maine, the vice president, J.D. Vance, called Canada a state before correcting himself and saying it was a Freudian slip.

So I guess I'm just wondering how all of that plays into the negotiation or whether it plays into the negotiation here. A hundred percent, because this kind of rhetoric has given Canadian leaders not a lot of room to compromise. If you look at public opinion polls in Canada, the overwhelming majority of Canadians don't want their leaders to compromise on trade with the U.S. Look at Trump's social today, even just in the last couple of hours, he has posted about how Canada's been, quote, ripping off the U.S. And that the U.S. is losing billions of dollars a year in trade with Canada without providing proof for that. And Canadian leaders, because they have this pressure back home from their voters, they've matched Trump's rhetoric with pretty aggressive rhetoric of their own. Look at the Premier of Ontario, Doug Ford's rhetoric from yesterday, saying Trump is the king of bankruptcies and that Trump, quote, could kiss his bottom using a different word that I cannot use on air. That's created this cycle that leaves both countries with very little room to back down.

And look, standing up to Donald Trump helped get Mark Carney elected prime minister. And his approval rating in Canada is a lot higher right now than Donald Trump's approval rating here in the United States. Canadians are viscerally offended by the tone that this administration has taken to them. It takes a lot to rile up Canadians, but they are riled up. And even though this trade war will carry economic sacrifice for our neighbors to the north, they are absolutely behind Carney and Doug Ford when they take this hard line. And look, this is already hurting businesses in the United States. Tourist businesses that cater to Canadian travelers are seeing a real,

real downturn in Canadian visits to the U.S. Even if Canadian provincial leaders put U.S. liquor back on the store shelves, I'm not sure Canadians are going to be buying any Kentucky bourbon or California wine. They are angry at the United States, and this is already taking a toll on U.S. businesses, and it's going to take a toll on U.S. consumers as well. Okay. We have to take a quick break, but more on how all of this could play out this year in the midterms after this. And we're back. So I do want to talk about the midterms and how this is going to play out. in this election season. Affordability obviously remains still a top issue for many voters.

And to this point, Senator Susan Collins, Republican in Maine, who's facing a very tough re-election campaign this year, has already come out against this trade war with Canada. Here she is speaking with C-SPAN on Saturday. I still think imposing new tariffs on Canada is a mistake. I really want us to go back to the very friendly, economically best. beneficial relationship that we have with our Canadian neighbors. Emily, it does feel like President Trump is making things a little difficult for Republicans running this year.

Absolutely. Tariffs are, in theory, supposed to protect American businesses. But they've been used more in the last couple of months under the Trump administration as a negotiating tactic. So to bring countries to the table to secure deals that are more favorable to the U.S. But when that doesn't happen, when these negotiations like these trade talks with Canada blow up and the threat is even more retaliatory tariffs, that's an increasing tax on American consumers. And the Canadians have pointed that out, you know, Prime Minister Mark Carney from Canada has pointed out aluminum prices, for example, that carmakers in the USUs that go into home construction, that that's gone up double digits because of American tariffs in this trade war with Canada. And this is concerning, I think, for Trump.

and Republicans that are trying to run for election or re-election. It also feels, Scott, like tariffs are kind of a long-game strategy? Do voters see any sort of, are they able to understand or feel the benefit that President Trump has always kind of promised that they would feel from tariffs? I don't think they've seen those benefits yet. There's promises that this is going to reshore industries in the United States. I don't think we've seen very much evidence of that. And again, with Canada, it's not as if, you know, they sell us some stuff and when we sell

some other stuff. It's not that kind of two-way tray. I mean, there's some of that, but it's also, literally, as Emily was saying, there's automobiles going back and forth across the border in the process of being produced. These two countries make things together. So this is a particularly misguided application of tariffs. The administration really conceded that tariffs are hurting affordability when they decided to relax tariffs on imported ground beef to try to tackle the price of beef in the supermarket. That's an acknowledgement that these are taxes that are paid by U.S. businesses and U.S. consumers. And they're not what the American people who are concerned about affordability are clamoring for right now. Something that Republicans and Trump are going to have

to clarify is what the purpose of these tariffs on Canada are. You know, we begin this episode by talking about the first run of tariffs, which were ostensibly about fentanyl trafficking and economic and national security. Now it's become about dairy and auto and liquor. tariffs. I talked to Philip Luck, who's in the economics program at CSIS, which is a think tank here in Washington, D.C. And he says, look, if it's really about dairy, then make these negotiations about dairy. Don't blow up the entire bilateral relationship because of that. And let's be clear. The U.S. has had longstanding complaints about protectionist tactics in Canada that limit U.S. dairy producers access to the Canadian market. The U.S. has had longstanding complaints about

softwood lumber exports from Canada. I'm not suggesting that there is no historical trade friction between these two trading partners. There is. That's normal. But there are processes within the USMCA for dealing with those trade frictions. And there are ways to address, you know, if the U.S. feels that Canada is dumping lumber in the U.S. There are countervailing duties that can be applied. But to blow up the broader trading relationship over those relatively small-scale issues is just nuts. Canadian Prime Minister, Mark Carney, has made this point that he says U.S. signatures on treaties at this point are signed in pencil, meaning that they can be easily erased.

What do you guys make of that? Has the sort of credibility of the United States changed in recent years when it comes to trade? Absolutely. President Trump is transactional. And every transaction is an opportunity to try to get an advantage on the person sitting across the table from you. But these are long-standing relationships. And if you poison the relationship for the sake of some transactional benefit in the moment, ultimately it's going to come back and haunt you. Case in point, the USMCA, which is being reviewed right now, it's the successor to NAFTA, but NAFTA didn't have any kind of sunset clause.

So it was effective until one of the three countries, Canada, the U.S. or Mexico, pulled out of it. The USMCA needs to be renewed every six years. And there's a reason why most free trade agreements don't have a sunset clause like this because businesses need planning horizons that are longer than six years. They need to trust that those rules that have been signed are going to remain those rules. So that's a huge amount of uncertainty for businesses. I want to touch on another economic story that's bubbling this week. Treasury Secretary Scott Bessett announced a new round of U.S. sanctions on Iran as well this week. Emily, what can you tell us about those?

They are not very new in the types of sanctions in economic pressure. tactics we put on Iran over the last some 50 years. There were about 60 entities that were newly sanctioned that the U.S. said was helping Iran sell oil or move money around. They were sanctioned yesterday. But this is kind of part and parcel of the whackamol strategy that the U.S. has taken with sanctions. You know, there are shell companies that pop up that help move Iranian money or goods around and then the U.S. sanctions them. They close down. New ones open up. But this is supposed to be very, very broad in scope. And Bessent seemed to really really. really obliquely refer to countries like the United Arab Emirates or China that have been

historically hubs for money laundering and for oil trade with Iran in the past. But he was kind of mushy about what the timeline for these new economic pressure tactics would be. He said the U.S. was calling countries to get them to voluntarily kick out shell companies or economic fronts that were giving a lifeline to Iran. But it's not clear, you know, when actual penalties might come down on countries that play host to these kinds of entities. He also didn't say specifically which countries the U.S. was calling. It seemed like the administration was trying to tout this as a sort of game changer in the conflict with Iran. Do experts you talk to have any thoughts on that idea? The U.S. doesn't have any direct trade with Iran. So the U.S. has always gone after these

countries and entities at the fringe around Iran who were helping Iran evade American sanctions. And it would be consequential if the U.S. could get China in particular to crack down on economic fronts that have bought and shipped the vast majority up to 90 percent sometimes depending on the year of Iranian oil before this war. But China's already said, we think these American sanctions are illegal and they actually have legislation on the books that would allow them to ignore American sanctions. This kind of call from Secretary Besson for international cooperation to advance an aim of the United States, it's the kind of thing that the United States would have done for decades when it was the architect and guarant

of an international order. But the U.S. has spent the last year and a half trying to blow up that international order through its trade policies, through its military policies. And the rest of the world right now is in no mood to do the U.S. any favors to advance its own aims. And in a war that it started without international approval. All right. We can leave it there. Scott Horsley, thanks as always for joining us. Great to be with y'all. I'm Miles Parks. I cover voting. I'm Emily Fang. I cover the White House.

And thank you for listening to the MPR Politics Podcast. Thank you.