{"id":7740,"date":"2026-08-26T13:52:31","date_gmt":"2026-08-26T13:52:31","guid":{"rendered":"https:\/\/www.rbc.com\/en\/thought-leadership\/?p=7740"},"modified":"2026-08-26T13:59:12","modified_gmt":"2026-08-26T13:59:12","slug":"trade-zone-where-the-new-u-s-tariffs-cut-the-deepest","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/geopolitics-trade-and-the-economy\/trade-zone-where-the-new-u-s-tariffs-cut-the-deepest\/","title":{"rendered":"Trade Zone: Where the\u00a0new U.S.\u00a0tariffs cut the deepest"},"content":{"rendered":"\n<div\n\tid=\"tl-fpb-1\"\n\tstyle=\"background-image:url(https:\/\/www.rbc.com\/en\/thought-leadership\/wp-content\/uploads\/sites\/27\/2026\/08\/TZ-8.26-Blog-Image_Banner-wide.jpg?quality=80&amp;w=4096);background-position:50% 50%;background-size:cover;min-height:500px\" class=\"tl-featured-post-banner wp-block-rbc-thought-leadership-blocks-featured-post-banner\">\n\t\t\t<div class=\"tl-featured-post-banner__gradient\" style=\"position:absolute;top:0;left:0;right:0;bottom:0;z-index:0;pointer-events:none;\"><\/div>\n\t\n\t<div class=\"tl-featured-post-banner__inner\">\n\t\t\t\t<a\n\t\t\tclass=\"tl-pill tl-pill--banner\"\n\t\t\thref=\"https:\/\/www.rbc.com\/en\/thought-leadership\/geopolitics-trade-and-the-economy\"\n\t\t>\n\t\t\tGeopolitics, Trade and the Economy\t\t<\/a>\n\t\t\n\t\t<div class=\"tl-featured-post-banner__content\">\n\t\t\t\t\t\t<h2 class=\"tl-featured-post-banner__title\">\n\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/www.rbc.com\/en\/thought-leadership\/geopolitics-trade-and-the-economy\/trade-zone-where-the-new-u-s-tariffs-cut-the-deepest\/\">\n\t\t\t\t\t\tTrade Zone: Where the\u00a0new U.S.\u00a0tariffs cut the deepest\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t<\/h2>\n\t\t\t\n\t\t\t\t\t\t<p class=\"tl-featured-post-banner__excerpt\">\n\t\t\t\tDigging into what it means for agriculture and autos\t\t\t<\/p>\n\t\t\t\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<p class=\"wp-block-paragraph\">After talks between&nbsp;Canada and the U.S.&nbsp;collapsed,&nbsp;U.S.&nbsp;President&nbsp;Donald Trump slapped&nbsp;50% tariffs on more than 500 Canadian goods\u2014amounting to 5%&nbsp;(~US$20 billion)&nbsp;of total exports to the U.S.&nbsp;Canada\u2019s response:&nbsp;&nbsp;dollar-for-dollar&nbsp;retaliatory tariffs.<\/p>\n\n\n\n<h2 id=\"h-the-big-picture\" class=\"wp-block-heading mar-t-dbl mob-mar-t-dbl has-rbc-bright-blue-color has-text-color has-link-color wp-elements-2f18f57a2e17c6941c058a0f6588d271\">The big picture<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Our colleagues&nbsp;in&nbsp;RBC Economics analyzed the impact of the new&nbsp;U.S.&nbsp;tariffs:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>5.5%<\/strong>&nbsp;\u2014 The average tariff rate on U.S. imports from Canada, up from ~3%, but still below the average U.S. tariff rate on imports from all countries.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>0.4%\u00a0<\/strong>\u2014Share of Canadian GDP directly exposed to new tariffs. While more than 80% of exports will remain tariff-free under the rules outlined in the Canada-U.S.-Mexico Agreement (CUSMA), the impact on the\u00a0sectors that have been targeted will be significant.\u00a0\u00a0\u00a0<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Read the entire&nbsp;RBC Economics&nbsp;report&nbsp;<a href=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/insights\/next-chapter-of-u-s-canada-trade-war-what-we-know-and-dont-about-section-338-tariffs\/\" data-dig-id=\"LP-Geopolitics,TradeandtheEconomy-7740-1484f6b6\" data-dig-category=\"LP-Geopolitics,TradeandtheEconomy\" data-dig-action=\"link click\" data-dig-label=\"here\" class=\"rbc-link-format\">here<\/a>.&nbsp;<\/em><\/p>\n\n\n\n<h2 id=\"h-mapping-the-impact-nbsp\" class=\"wp-block-heading mar-t-dbl mob-mar-t-dbl has-rbc-bright-blue-color has-text-color has-link-color wp-elements-512b1a4061fb6d47faa14ab8629b9343\">Mapping the impact&nbsp;<\/h2>\n\n\n\n<div id=\"everviz-_qSEfG8bA\" class=\"everviz-_qSEfG8bA\" data-view=\"graph\"><\/div>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc mob-mar-t mar-t\">\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\">B.C., Quebec, and Ontario are facing the brunt of the impact of the latest tariffs, with ~10-15% of their U.S. exports affected by the new levies.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\">Electrical equipment, plastics and packaging, and furniture and lighting make up the bulk of the affected goods.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\">The Prairies and Atlantic provinces,&nbsp;which&nbsp;largely export&nbsp;key&nbsp;goods that the U.S. relies on such as energy, potash and grains,&nbsp;are&nbsp;largely spared.&nbsp;<\/p>\n<\/li>\n<\/ul>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 id=\"h-agriculture-nbsp-that-s-nbsp-gonna-nbsp-sting-a-little-nbsp\" class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-6fcec1cee410f676d097ea7b2a97082d\">Agriculture:&nbsp;That\u2019s&nbsp;gonna&nbsp;sting a little&nbsp;<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Many of Canada\u2019s primary agri-food exports, such as grains, oilseeds, major protein and livestock, and processed goods were excluded from the Section 338 list.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, several important sectors are&nbsp;impacted:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Dairy<\/strong>: The sector was targeted meaningfully, but unevenly. The schedule applies to dozens of products most aimed at whey, milk\/cream concentrates, and several milk-protein ingredient products. The most significant product family affected is whey, of which more than $100 million worth of products were sold to the U.S. in 2025.&nbsp;Of&nbsp;note,&nbsp;yogurt, butter, and cheese are not included in the latest tariffs.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Honey, Sugars, Syrups<\/strong>: Natural honey was targeted, which could have severe impacts&nbsp;for&nbsp;beekeepers. Approximately $30 million worth of honey\u2014more than 50% of its exports\u2014went to the U.S. last year. Other syrup and sugar products such as glucose and glucose syrup ($100 million exported to U.S.) are included, but maple syrup ($540 million), was spared.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Horticulture, Botanicals, Essential Oils<\/strong>: Most bulbs, cut flowers, and other live plants are&nbsp;impacted, along with a comprehensive inclusion of essential oils. These are consequential, as $155 million worth of cut flower and flower buds were exported to the U.S. in 2025, and $52 million of bulbs and tubers. The value of essential oil exports to the U.S.&nbsp;was&nbsp;around $55 million, with 80% of exports going south of the border.&nbsp;&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Alcoholic beverages<\/strong>: The tariff schedule&nbsp;contains&nbsp;63 lines classified as alcoholic beverages and is a&nbsp;substantial, broad sectoral hit. It covers more than&nbsp;$1.2 billion&nbsp;of the major beer, wine, other fermented&nbsp;beverages&nbsp;and distilled&nbsp;spirits&nbsp;families.&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">With more than 60% ($60 billion) of Canadian agri-food sector exports reaching the&nbsp;U.S.&nbsp;annually, Americans have come to depend on Canada for food security and affordability. While these tariffs are severe for the sectors&nbsp;impacted, and will drive up prices for U.S. consumers, they do not change the macroeconomic picture for Canadian agriculture.&nbsp;<\/p>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 id=\"h-autos-nbsp-what-the-canadian-market-means-to-the-u-s-nbsp-nbsp\" class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-f2fb2fa4ab27203e4b791ee195470909\">Autos:&nbsp;What the Canadian market means to the U.S.&nbsp;&nbsp;<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">On Monday, Trump&nbsp;announced&nbsp;that he will double the tariffs on&nbsp;the Canadian&nbsp;auto industry to 50%, levying the punishing rate on cars, trucks, and parts,&nbsp;in addition to&nbsp;steel. In his post,&nbsp;the&nbsp;president&nbsp;said that Americans&nbsp;don\u2019t&nbsp;need Canada.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The North American auto industry is highly integrated; parts cross borders across North America up to eight times before a vehicle is assembled.&nbsp;Such tariffs&nbsp;would&nbsp;devastate&nbsp;Canada\u2019s auto industry more than reciprocal tariffs&nbsp;would&nbsp;hurt the U.S.&nbsp;sector\u2014but in absolute terms, the auto sectors on both sides of the border will be damaged by an escalating trade war.&nbsp;&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>The breakdown:<\/strong>&nbsp;Auto trade between Canada and the U.S. is $100 billion (across assembly, parts, and body &amp; trailer). The U.S. runs a&nbsp;$3 billion&nbsp;surplus. Whatever trade is&nbsp;forfeited&nbsp;with Americans, they stand to lose as well.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Production hit in the U.S.:<\/strong>&nbsp;While most of the 10-11 million vehicles that are assembled in the U.S. are sold domestically, about 15% are exported, with Canada serving as the largest export market&nbsp;by far\u2014<a href=\"https:\/\/www.rbc.com\/en\/thought-leadership\/geopolitics-trade-and-the-economy\/trade-zone-can-the-canada-u-s-auto-pact-survive\/\" data-dig-id=\"LP-Geopolitics,TradeandtheEconomy-7740-1484f6b6\" data-dig-category=\"LP-Geopolitics,TradeandtheEconomy\" data-dig-action=\"link click\" data-dig-label=\"more than the next 10 export markets combined\" class=\"rbc-link-format\">more than the next 10 export markets combined<\/a>. Closing the door on American imports would hit a channel equal to 7-10% of annual U.S. production.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Canadians are big car buyers:<\/strong>&nbsp;Only Americans buy more cars than Canadians on a per-capita basis. Canadians spend&nbsp;nearly&nbsp;$110 billion&nbsp;annually on cars, with 90% of those vehicles built abroad. Canadians also have a penchant for heavier, higher-value vehicles. The Ford F-Series have been the best-selling vehicle in Canada for 15 consecutive years.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>Tariffs make vehicles more expensive<\/strong>: Auto tariffs on Canada and Mexico alone&nbsp;totalled&nbsp;$1,600 for every vehicle assembled in the U.S.\u2014and that&nbsp;doesn\u2019t&nbsp;account for steel and aluminum tariffs.&nbsp;Tariffs against Canada and Mexico cost North American automakers and suppliers&nbsp;<a href=\"https:\/\/www.andersoneconomicgroup.com\/wp-content\/uploads\/2026\/05\/AEG_Auto_Tariff_YE2025_Update_reformat.pdf\" data-dig-id=\"LP-Geopolitics,TradeandtheEconomy-7740-1484f6b6\" data-dig-category=\"LP-Geopolitics,TradeandtheEconomy\" data-dig-action=\"link click\" data-dig-label=\"$12.5 billion\" class=\"rbc-link-format\">$12.5 billion<\/a>&nbsp;in the past year.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p class=\"wp-block-paragraph\"><strong>The U.S. is losing market share:&nbsp;<\/strong>While the Canadian market is small&nbsp;relative&nbsp;to the U.S., it is still the largest global buyer of American-made cars and trucks. In the decade before Trump imposed tariffs on the Canadian auto industry, 49% of vehicles imported to Canada were manufactured in the U.S. In the first 10 months of 2025,&nbsp;<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2026-01-16\/us-auto-market-share-tumbles-in-canada-with-trade-war-raging?utm_medium=cpc_search&amp;utm_campaign=NB_ENG_DSAXX_DSAXXXXXXXXXX_EVG_XXXX_XXX_COUSA_EN_EN_X_BLOM_GO_SE_XXX_XXXXXXXXXX&amp;gclsrc=aw.ds&amp;gad_source=1&amp;gad_campaignid=9835680891&amp;gbraid=0AAAAAD9e5yq7r7IvGuvDKwnKFwQfMjSsL&amp;gclid=EAIaIQobChMIqPbU1L-5lgMV-zGHAx3nCRgKEAMYASAAEgLBOPD_BwE\" data-dig-id=\"LP-Geopolitics,TradeandtheEconomy-7740-1484f6b6\" data-dig-category=\"LP-Geopolitics,TradeandtheEconomy\" data-dig-action=\"link click\" data-dig-label=\"that number dropped to 36%,\" class=\"rbc-link-format\">that number dropped to 36%,<\/a> with South Korean and Mexican-made vehicles gaining share.&nbsp;If&nbsp;even&nbsp;higher tariffs come into effect, that trend&nbsp;may&nbsp;continue.&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel mar-t mob-mar-t mar-b mob-mar-b has-rbc-bright-blue-tint-1-background-color has-background\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner pad-t mob-pad-t mob-pad-b pad-b\" style=\"border-radius:0x\">\n<p class=\"has-white-color has-text-color has-link-color wp-elements-ede06812b5b12f44d6ed4868a85230e8 wp-block-paragraph\"><strong>Contributors:<\/strong> Alicja&nbsp;Siekierska, Farhad Panahov, Wilson&nbsp;Fink&nbsp;and&nbsp;Jordan Brennan<\/p>\n<\/div>\n<\/section>\n<style class=\"advgb-styles-renderer\">@media (min-width:782px){#tl-fpb-1 .tl-featured-post-banner__gradient{background:linear-gradient(135deg, #070707, #00356300 100%);opacity:1;}}@media (max-width:781px){#tl-fpb-1{background-image:url(https:\/\/www.rbc.com\/en\/thought-leadership\/wp-content\/uploads\/sites\/27\/2026\/08\/TZ-8.26-Blog-Image_Banner-wide.jpg?quality=80&w=4096)!important;background-position:50% 50%!important;background-size:cover!important;min-height:400px!important;}#tl-fpb-1 .tl-featured-post-banner__gradient{background:linear-gradient(45deg, #070707, #00356300 100%);opacity:1;}}<\/style>","protected":false},"excerpt":{"rendered":"<p>Digging into what it means for agriculture and autos<\/p>\n","protected":false},"author":89,"featured_media":7741,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"disable_focal_point":true,"featured_image_focal_point":{"x":0.5,"y":0.5},"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","editor_notices":[],"footnotes":"","jetpack_post_was_ever_published":false},"categories":[127],"tags":[],"rbc_tl_platform":[133],"rbc_tl_newsletter":[144],"rbc_tl_content_type":[126],"rbc_tl_author":[179],"class_list":["post-7740","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-geopolitics-trade-and-the-economy","rbc_tl_platform-the-trade-hub","rbc_tl_newsletter-the-trade-zone","rbc_tl_content_type-articles","rbc_tl_author-rbc-thought-leadership"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.2 (Yoast SEO v28.2) - 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