US-Canada Tariffs: Protection Racket

Facts and concepts have not been big factors in trade policy, so it is hard to say a deal is even done given very recent history.

Aug 19, 2026

There is little choice but to sit back and watch the show and see if this is the Canada of Juno Beach and the Battle of Passchendaele who showed up.
The “DEAL” (Trump’s all caps) is hard to believe given recent experiences on alleged done deals, but the math seems unworkable given the demands for one-way tariffs and essentially a first refusal rights on some of Canada’s important natural resources.
Trump is not big on admitting who writes the check for the tariffs, and we suspect he will not take this opportunity to admit it is the US buyer. If this breaks down, supplier chain costs rise and many prices as well. The Canada retaliation doomsday scenario (resource and energy export taxes) are not ruled out explicitly (yet).
The US continues to have a goods trade surplus with Canada ex-crude, and the mainstream media (including CNBC) avoid that topic. The logic gets more twisted when the trade game plan is for higher crude oil imports that will grow the all-in trade deficit. That makes the current rumored terms even stranger. Logic and basic economics never play a role in Trump’s trade strategy, and his Cabinet and advisor bobbleheads all nod yes and fall into line.

What is so striking about the strange trade abuse of Canada by Trump is it comes after a period of praise for North Korea - an atheist country that persecutes Christians (maybe the MAGA evangelists and Christian extremists did not get the memo). That Kim gesture came with insults to South Korea, a longstanding ally since the Cold and Hot Wars of bygone years.

On a side note, I had a parent enlist in the Marines out of high school to fight in Korea, and I met more than few Korea vets at Legion and VFW events as a kid. This latest stunt with Kim Jung Un is shocking in historical context (even if not shocking for an egomaniacal draft dodger). That is after a stretch of time when Russia and Putin got an over-the-top red-carpet welcome. Meanwhile, Trump has done his best to undermine Ukraine. Upside down world.

The Canadian scoresheet

Through the most recent trade data of June 2026 (reports at a lag), the running YTD goods trade deficit was a fairly minimal -$24.2 billion that is easily erased by the oil line and becomes a surplus ex-crude. That gets broken out each month by the Census with a raft of data.

We have looked at the import/export mix and history of the product mix in the past, so we are not revisiting it here (see links at the bottom). We should also highlight that the US generates a trade surplus in Services with Canada that seldom gets cited (around +$29 billion in 2025).

One of the leaked terms of the “DEAL” that was really shocking is Trump’s efforts to lock up first claim on minerals and metals. We have no idea what that would entail without the terms, but that sounds like offering a powerful first option on the family jewels that severely limits alternatives for the future. Offshore capital options could be undermined by such a structure given the disincentive for others to bid and plan.

Trump’s war on Canadian autos is well known and his desire to support US wood products and furniture and even cabinet makers at the expense of the US consumer are not even worth debating at this point. We will just wait for the details – if a deal in fact happens.

A complicating factor could be the Canadian form of government and how the provincial leaders react. Carney does not have the luxury of a spineless, sackless Congress with no willingness to do their jobs of providing checks and balances on the King. He needs consensus and buy-in.

Canada Tariff Commentaries:

Canada-US Trade: Trump Attack N+1 1-25-26

US-Canada Trade: 35% Tariff Warning 7-11-25

Tariffs: Amazon and Canada Add to the Drama 4-29-25

Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25

Aluminum and Steel Tariffs: The Target is Canada 2-10-25

US Trade with the World: Import and Export Mix 2-6-25

The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25

Tariffs: Questions to Ponder, Part 1 2-2-25

US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25

Tariff: Target Updates – Canada 11-26-24

Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24