Trump announces 50% tariffs on Canada. What it means for consumers

Rachel Barber, USA TODAYTue, July 21, 2026 at 8:25 PM UTC

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The Trump administration on July 20 announced 50% tariffs on many Canadian imports, though exemptions mean the hit to most Americans’ budgets is likely to be limited, unless they buy targeted goods affected by the new duties, economists say.

President Donald Trump said he is using Section 338 of the Tariff Act of 1930 to impose the tariffs in response to what the administration calls discriminatory Canadian trade practices against the United States, particularly its auto industry. The tariffs are scheduled to take effect on Aug. 19, but Canadian Prime Minister Mark Carneyhas signaled he is open to negotiations, so the final rate and scope could still change.

The tariffs will primarily impact goods flowing into the United States from Canada’s auto, alcohol and dairy industries. Oil, natural gas, critical minerals and other Canadian products are exempt.

Although Canada is the United States’ second-largest trading partner, those exemptions limit this round of tariffs’ impact to about 5% of the $382 billion in Canadian imports to the United States recorded in 2025, according to Brian Therien, a senior analyst at Edward Jones.

Tariffs have become a defining feature of Trump’s economic agenda in his second term, even as they have faced several legal challenges. Although the Supreme Courtruled against many of the sweeping tariffs Trump announced April 2, 2025, and forced some refunds, the administration continues to look for ways to implement similar import taxes.

More: Giant Eagle lowers prices, joining other retailers. What costs less?

Will new tariffs raise US consumer prices?

Alongside Trump’s proclamation, the White House released an 18-page list of hundreds of Canadian imports that will be affected by the new 50% tariff. The list ranges from honey and flowers to plywood and clothes.

Tariffs are a tax on imported goods into the United States. U.S-based importers pay the price, often before selling the goods to retailers who then sell to consumers. Along the way, a tariff price increase can either be absorbed or passed on.

Shikha Jain, a Simon-Kucher partner and lead of the consumer sector for North America, said if this new round of tariffs on Canadian imports takes effect Aug. 19, she expects most retailers will pass cost increases onto consumers over the next three to four months.

“However, the flip side to this is that we know when there are very severe price hikes, or at least a 20% increase in discretionary pricing, about 20% of consumers stop purchasing all together,” Jain said, adding businesses will carefully weigh price increases because if they get “too high, they might not be able to move product.”

Additionally, many U.S. homebuilding materials have historically come from Canada, so a 50% tariff could raise the cost of some key inputs and make an already-tough process of building new homes in the United States a more expensive task, according to James Knightley, chief international economist at Dutch bank ING.

“It’s more pressure on the home builders themselves,” Knightley said. “Just squeezing their margins, a little bit more.”

For consumers hoping to avoid tariff cost increases, his advice is simple: “Buy American.”

Have tariffs increased inflation?

When Trump in April 2025 announced tariffs on imports from a host of nations worldwide, economists were concerned that they would meaningfully raise prices for U.S. consumers.

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“That was when, of course, we were talking about tariffs of 30% to 50%,” Knightley said, adding the U.S. effective tariff rate was about 2.5% before Trump retook office in 2025. “But as we saw, the administration swiftly changed those tariffs rates, and we settled at an average tariff rate of about 16% or 17%, yet the actual realized rates undershot expectations.”

About a year later, Federal Reserve Bank of Dallas researchers have an answer. They estimated that year-over-year core Personal Consumption Expenditures – a measure of inflation – would have been 2.3% in March this year, had it not been for tariffs. Instead, it was 3.2%.

"We’re seeing about 25% of the inflation coming from tariffs,” Jain said, adding typical year-over-year inflation and price increases tied to the Iran war make up much of the rest, but that, “A lot of other businesses use tariffs as the reason or as the excuse to take prices up, and it’s easy for consumers to have something to blame.”

So, are tariffs inflationary?

“The short answer is yes. Tariffs cause inflation. They are inflationary by nature,” said Per Hong, partner and global lead of Kearney Foresight, an internal think tank within management consulting firm Kearney.

He added that supply chains are also "adaptive in managing and mitigating the impacts of that.”

Where are tariffs and prices headed?

The 30-day window before the new round of tariffs on Canadian imports take effect has begun. For now, Canada “stands ready to engage intensively” with U.S. negotiators to come to an agreement "to the mutual benefit of our citizens,” Carney said in a July 20 statement.

Knightley said because tariffs are typically challenged in court once they take effect, a lawsuit is unlikely to stop the Trump administration from implementing them.

“It’s more about whether enough concessions are achieved to get it moderated,” he said. “For me, I think it unlikely that we will see a meaningful reduction.”

The Trump administration is also working to implement tariffs several other ways under different authorities. Drew DeLong, head of corporate statecraft in Kearney Foresight, said he would be surprised if the U.S. effective tariff rate is not higher at the end of 2026 than it was at the end of 2025.

Whether because of tariffs, limited oil supply tied to the Iran war, or something else, Jain said average American consumers should expect prices to keep rising.

“It’s going to be difficult for us to see a world where we get stable prices in the next three or four years,” she said.

Reach Rachel Barber at rbarber@usatoday.com, follow her on X @rachelbarber_, and subscribe to her newsletter "Making More of Your Money" here.

This article originally appeared on USA TODAY: Trump’s Canada 50% tariffs target select goods. What could cost more?

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