Nicolai Haugsted
Economists sound alarm over the hidden cost of Trump’s Canada tariffs.
Fresh analysis is raising new questions about the economic impact of Donald Trump’s trade strategy with Canada, arguing that some of the biggest costs have fallen not on foreign governments, but on American communities closest to the northern border.
The findings dug up by The Walrus come after the Trump administration sharply escalated trade tensions by imposing new tariffs on Canadian imports while attempting to gain leverage ahead of negotiations over the Canada–United States–Mexico Agreement (CUSMA).
On July 20, the administration announced 50% tariffs on roughly $20 billion worth of Canadian products under Section 338 of the Tariff Act of 1930, a provision that had not been used for decades.
The measures target products including dairy, alcoholic beverages and other imports that had previously remained duty-free under CUSMA.
Washington said the move was intended to respond to Canada’s retaliatory measures against American goods, including provincial decisions to remove U.S. alcohol products from store shelves.
Border towns hit hardest
While economists have largely focused on higher consumer prices caused by tariffs, new research argues that the earliest damage appeared elsewhere.
A recent working paper estimates that declining Canadian tourism has cost U.S. border communities between 10,000 and 30,000 jobs in the leisure and hospitality sectors, along with annual wage losses estimated at between $500 million and $1 billion.
According to the analysis, those losses have been concentrated in communities whose economies are closely linked to Canadian visitors.
Canada remained America’s largest international source of visitors in 2024, accounting for 28% of all overseas arrivals, with most entering the country through land crossings.
Tourism has yet to recover
Researchers found that Canadian travel to the United States has remained significantly below pre-dispute levels despite later adjustments to tariff policy.
Land crossings during March and April 2026 were still about 20% lower than the same period in 2024. Although travel improved modestly in May, visitor numbers remained well below earlier levels.
A Longwoods International survey conducted in April also found that 57% of Canadians said U.S. trade policies had made them less likely to travel south during the following year.
Separate research using business payroll data similarly concluded that job losses were concentrated in a relatively small number of border communities, particularly lower-income areas heavily dependent on Canadian tourism.
The administration has argued that stronger tariffs will pressure Canada into changing its policies, particularly as negotiations over CUSMA continue.
However, the report argues that consumer behavior may prove far harder to influence than government policy.
While some Canadian countermeasures have already been eased and provincial leaders have indicated a willingness to revisit restrictions on American alcohol imports, Canadian travel patterns have shown little sign of returning to previous levels.
Researchers behind the analysis argue that economic relationships built over decades can be damaged long after tariff rates themselves are adjusted, leaving border communities to shoulder lasting consequences while broader trade negotiations continue.
