How the trade war with Canada is hitting US states—and could sway midterm elections

The United States and Canada have been locked in a trade war for over a month. And now, it’s becoming a political problem.

Following US threats to impose 50 percent tariffs on about twenty billion dollars’ worth of imports, Ottawa and Washington began fierce negotiations. But the talks fell through, triggering a tit-for-tat, escalating trade war. Canada imposed retaliatory tariffs on twenty billion dollars’ worth of US exports, the US imposed an import ban on certain Canadian goods, and both sides seem to be digging in for the long haul.

Tariffs on both sides of the border have concentrated the financial burden on specific states and industries, bringing the trade war into some of the country’s most competitive political races and changing the political calculus ahead of the November US midterm elections.

But the harm may spread well beyond this midterm cycle. The four charts below show what this trade war means for the North American economy and what would happen if the spat intensified.

The current retaliation scheme

The current Canadian retaliation list is arguably small—covering about twenty billion dollars’ worth of US exports—but its effects are concentrated and politically salient. It packs an economic punch. The tariffs hit products for which US exporters depend heavily on Canadian demand. For example, while toilet paper may represent only a small share of total US exports, American producers rely on Canada for more than 75 percent of their market and could face substantial financial pressure.

And the retaliation lands unevenly across US states, concentrating economic pain in politically important states such as Pennsylvania, Texas, and Illinois ahead of the midterm elections. For some industries, the vulnerabilities are even more striking: Canada buys 100 percent of Michigan’s kraft paper exports, 95 percent of Alabama’s oven exports, and 88 percent of Wisconsin’s blue cheese exports according to US import data. Ottawa’s tariffs on such products put pressure on highly trade-dependent industries and the communities built around them. The political implications are hard to miss.  

Certain states are on the chopping block for further retaliation

But with neither side negotiating right now, the tariff spat could continue to escalate, leaving certain states especially vulnerable. Zooming out of the current scheme and looking toward national and state-level trade trends, this could have a huge impact. Canada is the largest foreign market for US goods. North Dakota is particularly exposed, sending 81 percent of its exports to Canada, while larger economies such as Michigan and Ohio depend heavily on Canadian demand for key sectors like autos, machinery, and metals.

As the November midterms approach, that exposure is turning a national trade dispute into a local political problem. According to a recent survey, over 60 percent of Americans oppose tariffs on Canada, including 64 percent of independent voters. In closely contested states such as Maine and Michigan—states particularly integrated with the Canadian economy—these numbers become even more salient. Senator Susan Collins (R-ME) has been distancing herself from the administration’s tariffs and warning about their effects. In Michigan, Republican Senate candidate Mike Rogers called for an end to the US-Canada tariff dispute, breaking with the president. As tensions worsen, the tariff policy may be national, but the economic pain is increasingly local.

Products ripe for retaliation

Specific industries with lots of political sway have been—noticeably—left out of the US-Canada trade war to date. Some of the biggest and most politically powerful industries have been relatively sheltered from US tariffs, but that doesn’t mean they will always be safe. For example, the auto and oil sectors of the economy, which play an outsized role in both North American trade and US politics, have been left off the trade chopping block. But that doesn’t mean they always will be, and the threat of escalation is certainly top of mind for these industry groups heading into the midterms.

Autos account for just under 20 percent of all trade within the United States–Mexico–Canada Agreement, and both Ottawa and Washington have been hesitant to touch it. The US has partly shielded the sector by exempting USMCA-compliant autos and parts from the 25 percent Section 232 national security tariffs imposed in April 2025. Even so, the average tariff rate on autos and parts from Canada jumped from 0.2 percent in February 2025 to 9.2 percent in August this year, despite USMCA covering 95 percent of these imports. But the rapidly escalating trade war could put the auto industry directly in the line of fire. If Section 232 tariffs were to apply to all auto imports—regardless of USMCA status—importers could pay an additional $44 billion in tariffs.

Oil is another sector in which Canada and the United States remain deeply interdependent. While it has so far been spared in the trade war, its importance to both economies makes it a critical bargaining chip.

Canada is preparing in case this becomes a reality. This month, it decided to fast-track the development of a West Coast Oil Pipeline that would carry more than one million barrels of oil per day from Alberta to the Pacific coast, expanding access to Asian markets and reducing Canada’s reliance on the US market. Since the 2024 Trans Mountain pipeline expansion, Canadian crude exports to non-US markets have risen sharply while US-bound volumes have remained relatively flat.

And this trend will likely grow as global demand for Canadian oil grows too. US sanctions and tariff pressure on Russian and Iranian oil are encouraging major buyers to diversify their suppliers. Ottawa has what it needs to diversify: An opening market, infrastructure, and an unhappy buyer in the US.

A politically (and economically) costly trade war

This trade war comes at an opportunity cost. As the countries ratchet tariffs up and down, they forgo critical conversations on how to modernize their deeply integrated economic system, build resilience to excess capacity from China, and cope with instability in the Middle East. At a moment that calls for greater cooperation, the economies are instead picking each other apart. And because the costs of the war are unevenly distributed across the region, Washington and Ottawa both have incentives to test how much pressure the other can absorb.

If the trade war continues to progress, it could cause a much deeper disruption in the relationship between the US and its northern neighbor: weakened auto supply chains, disrupted oil flows, and closer Canadian cooperation with non-US countries. The current trade war is inflicting targeted pain, but the long-term impacts of escalating tension may be much more severe.

Madeline Chalecki is an assistant director at the Atlantic Council’s GeoEconomics Center, where she leads the center’s work on trade policy, tariffs, and supply chains, including the Trump Tariff Tracker.

Delnaz Ghadiali is a young global professional at the Atlantic Council’s GeoEconomics Center.