How Canada could hit back to hurt the US economy and Trump
Explore the leverage and economic pressure Canada holds against US tariffs, ranging from energy and critical minerals to alcohol boycotts and tourism drops.
Stock photo for illustration only, not from the actual event
- Canada sends about 70% of its goods to the US and is the top customer for 26 states.
- Ottawa considers leveraging energy exports including natural gas, electricity, and crude oil.
- Provincial bans on US alcohol caused a 78% drop in wine exports and over 70% in spirits.
- Travel boycotts by Canadians resulted in a C$3.3bn revenue loss for the US last year.
Amid escalating trade tensions between Canada and the United States under Donald Trump, observers are closely watching the actual leverage Ottawa holds against its southern neighbour. Canada remains the top customer for 26 US states—including Maine, Michigan, and Wisconsin—and ranks in the top three for 45 out of the 50 American states, indicating that Prime Minister Mark Carney has substantial room to manoeuvre in this trade dispute.
Canada's Finance Department announced that additional measures to safeguard workers and businesses would be unveiled on Tuesday. Among the areas where Canada can exert economic pressure is energy. Carney noted that Canada supplies the vast majority of US natural gas and electricity imports, alongside roughly 60% of crude oil imports. While squeezing the US on energy is not part of current countermeasures, political officials have explicitly stated it remains on the table.
Stock photo for illustration only, not from the actual event
Carney previously floated a 25% surcharge for 2025 on all electricity exports to the US, which Ottawa estimated would impact 1.5 million homes and businesses across Michigan, Minnesota, and New York. Furthermore, the country stands as a primary global supplier of key commodities like potash, alongside holding significant reserves of critical minerals such as lithium, nickel, and graphite, with the US serving as the top destination for Canadian mineral exports.
This trade confrontation carries unique complexities due to the deeply integrated supply chains between the two North American economies, particularly in the automotive and energy sectors. By controlling upstream resources and essential raw materials, Canada can directly impact economic stability and consumer costs within key US border states, directly influencing the political landscape ahead of midterm elections.
Canada has already demonstrated its capacity to inflict economic pain south of the border. Even prior to the breakdown of trade talks, decisions by most provinces to ban US alcohol from liquor store shelves in response to early US tariffs dealt a devastating blow to the American beverage industry. Government data revealed that US wine exports to Canada plummeted by 78% year over year, translating to a $357m loss in export value, while distillers reported American spirit exports dropping by more than 70%. This boycott remains active across 11 of Canada's 13 provinces and territories.
Beyond state-level policy decisions, grassroots actions by individual citizens have also hurt the US economy, particularly through avoided travel. Despite a slight recovery in April road trips, national data shows Canadians made 800,000 fewer trips that month compared to the same period in 2024 before Trump took office. This travel boycott cost the US roughly C$3.3bn in revenue last year, prompting targeted advertisements and special promotions from several American cities attempting to lure Canadian visitors back.
Stock photo for illustration only, not from the actual event
"What is the message sent out to the workers in Michigan, Ohio, Kentucky, Alabama? These workers depend absolutely on Canada, their largest consumer."
Mark Carney
Political pressure and public timing serve as additional negotiation tools. While financial analysts estimate that recent 50% tariffs on roughly $20bn of Canadian imports could shave 0.3% to 0.6% off Canada's GDP in the short term, a weekend Angus Reid poll indicates that roughly 76% of Canadians support Ottawa's decision to walk away from talks despite job security concerns.
The upcoming US midterm elections place the economy front and centre for voters, with the Republican congressional majority appearing vulnerable. According to the Yale Budget Lab, global tariffs enacted by Trump will cost American households approximately $1,100 annually. Further cost increases on goods and broader trade fallout could heavily sour public sentiment regarding the US economy.
Source: BBC Business
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