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DETROIT – Canada is expected to announce retaliatory tariffs against the U.S. on Tuesday, as the latest breakdown in trade negotiations threatens to add uncertainty for Michigan businesses, contractors and consumers.
Canadian officials are also expected to outline assistance for workers affected by the tariffs. Prime Minister Mark Carney has indicated Ottawa may choose a targeted response rather than matching every U.S. tariff dollar for dollar.
The expected announcement follows a week of shifting deadlines. President Donald Trump extended a pause in threatened 50 percent tariffs on roughly $20 billion worth of Canadian goods from Wednesday to Friday, giving negotiators more time to reach an agreement.
Canada called off the discussion late Friday after concluding that U.S. proposals could damage major industries, including automobile manufacturing, steel and aluminum.
Carney said the demands would have weakened Canada’s industrial base. He also rejected what he described as an expectation that Canada should act as a subsidiary of the U.S.
Monday escalation
The dispute intensified Monday when Trump threatened additional 50 percent tariffs on Canadian vehicles, auto parts and steel beginning next year. He also accused Canada of taking advantage of the U.S. and criticized Canadian tariffs affecting American farmers.
Carney said the U.S. auto proposals would undermine the deeply integrated manufacturing system shared by the two countries. Vehicles and parts routinely cross the border multiple times during production, making the sector especially vulnerable to new trade barriers.
Ontario Premier Doug Ford said Canada should be prepared to withstand economic pressure rather than accept terms he considers harmful. Ford warned that Ontario could consider measures involving electricity and critical minerals if the conflict expands.
Ontario provides power to about 1.5 million homes and businesses. Its critical minerals are used in sectors important to U.S. manufacturing and national security.
The dispute has also become personal. Trump criticized Ford on social media and continued referring to Carney as “Governor Carney.” Ford dismissed the attacks and said Canadians were prepared to make sacrifices in response to U.S. pressure.
How Michigan businesses could be affected
Michigan is especially exposed to the dispute because of its close economic ties with Canada. The state relies on Canadian suppliers, manufacturers and customers across the auto, construction, agriculture and retail sectors.
Jason Miller, an associate professor of supply chain management at Michigan State University, reviewed the federal tariff list and estimated it covers about 488 product categories, representing roughly $20 billion in annual U.S. imports from Canada.
The categories include dairy, alcoholic beverages, motor vehicle parts and lumber, along with paper products, facial tissue, napkins, fresh flowers, sporting equipment, furniture, clothing, footwear, chemicals, plastic goods and selected telecommunications products.
The list also includes hockey protective equipment. Miller said hockey sticks are not a major Canadian import for the United States, with many of the sticks sold here coming from China.
Miller estimated the average tariff rate on the listed categories is currently about 1.6%. Under the proposed 50% duties, annual tariff payments by U.S. importers could rise from roughly $325 million to about $10 billion.
“Michigan is by far the most exposed state to trade from Canada,” Miller said. “The biggest concern I have for Michigan businesses is this will further push Canadians away from wanting to engage with trade with the U.S., which will hurt our exports.”
Tariffs are paid initially by U.S. importers. Companies may absorb the additional cost, reduce spending or pass some of it along to other businesses and consumers.
Miller said higher costs could affect profitability and lead companies to delay product releases, reduce marketing or capital spending, and hire fewer workers. He also said there is no evidence yet that the tariff policy is increasing American manufacturing employment, noting that Michigan manufacturing employment is below where it was one and two years ago.
Lumber and renovation costs
Construction and renovation companies in Michigan rely on an integrated supply chain that includes Canadian wood products. Adam Helfman of Hire It Done said Canadian materials are used in projects involving lumber, insulation, siding and composite decking.
“People aren’t moving, they’re improving,” Helfman said, describing the renovation market.
Helfman said tariffs could raise costs as increases move through manufacturers, distributors, lumberyards, contractors and homeowners. He estimated a deck that previously cost $10,000 could reach about $12,500 after higher material and labor expenses.
He said some standard 2-by-4 lumber that once sold for less than $1 can now cost $4, $5, or more, depending on the product and market conditions. A deck, room addition or floor-plan change can require hundreds of pieces of lumber.
Helfman recommends that homeowners get a full, guaranteed price before work begins and review contracts for an escalation clause. Those clauses can allow contractors to pass along unexpected increases in material or labor costs.
Homeowners purchasing materials themselves can check product labels for the country of manufacture. Helfman said Canadian-made products are generally high-quality, but tariffs could make them less affordable.
What Canada may announce Tuesday
Canada’s response is expected to focus on selected U.S. goods and industries rather than simply mirror the value of the American tariffs. The aim would be to pressure Washington while limiting damage to Canadian companies and workers.
The federal government is also expected to announce support for workers affected by the trade measures. Ontario officials have raised the possibility of stronger action involving electricity, oil, potash and critical minerals if Washington continues targeting Canadian industries. Those steps have not been announced as part of Tuesday’s expected tariff package.
The U.S. and Canada have one of the largest trading relationships in the world. Nearly three-quarters of Canada’s goods exports go to the United States, and annual trade in goods and services between the countries totals about $880 billion.
A prolonged dispute could raise costs and disrupt production on both sides of the border, particularly in the auto industry. It could also discourage Canadian customers from buying American products and make Michigan exports less competitive.
What happens next
The long-term future of the tariffs remains uncertain. Miller said a legal challenge could take months or about a year to resolve. Even if a court eventually rejects the tariffs, companies that paid them could face cash-flow problems while waiting for refunds.
Trump is relying on Section 338 of the Tariff Act of 1930 as the legal basis for the new Canada tariffs. The provision allows a president to impose tariffs of up to 50 percent on imports from countries accused of discriminating against U.S. businesses. It does not require a prior investigation or set a time limit for the tariffs.
The provision dates to the same era as the Smoot-Hawley tariff law, which economists and historians have long associated with a decline in global trade during the Great Depression.
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