Canada is stepping up its trade retaliation against the United States, seeking to turn tariffs from a source of economic pain into leverage that could bring Washington back to the negotiating table.

Canada’s counter-tariffs on US goods take effect on September 8, following the federal government’s August 25 announcement of tariffs on 27.6 billion Canadian dollars (about $20 billion) worth of US products. The measures cover a range of goods, including steel and aluminum, dairy products, home appliances and agricultural equipment.

Ottawa has said the value of the targeted US goods is roughly equivalent to the value of Canadian products subject to Washington’s 50% tariffs, framing the move as an “equal and reciprocal” response.

Wan Zhe, a professor at Beijing Normal University and an expert in economics told China Media Group that Canada’s strategy goes beyond simply matching US tariffs. Its broader calculation is to raise the domestic political and economic costs of US trade protectionism while preserving room for negotiation.

"Canada is not simply responding passively, but is playing a combination of cards,” Wan said.

Canada’s 'precision pressure' strategy

She analyzed that one key strategy is the precision-targeted tariff. By imposing tariffs on sectors such as steel, aluminum, dairy, agriculture, appliances, electronics and consumer goods, Canada hopes to pass some of the costs of the trade dispute into politically sensitive areas of the US economy.

Some of the targeted industries are concentrated in states where employment, manufacturing and agricultural interests carry political weight. By increasing costs for US businesses and consumers, Canada could potentially amplify domestic pressure on the US administration to reconsider its approach.

Wan said the timing also matters politically, as the United States heads toward the 2026 midterm elections. Canada may therefore be seeking not only economic leverage, but also a way to make the political costs of prolonged trade tensions more visible inside the United States.

Tariffs, however, are not Canada’s only bargaining chip. 

Wan said the two countries have deeply interconnected supply chains, with the United States relying heavily on Canada for energy, agricultural inputs and critical raw materials. Canada is a major supplier of crude oil and natural gas to the US, while more than 80% of US potash imports come from Canada.

Potash is a key agricultural input, meaning disruptions could eventually feed into US farming costs, food production and inflation.

Canada also supplies a range of critical raw materials, while several US border states rely heavily on Canadian electricity. Many of these supply links cannot be rapidly replaced, giving Ottawa potential leverage that goes beyond conventional tariff measures, according to Wan.

The structure of North American manufacturing presents another constraint — and another source of leverage.

US and Canadian industries, particularly the automotive sector, are deeply integrated, with components and products crossing the border multiple times during the manufacturing process.

As a result, Wan said that tariffs imposed by Canada on US goods can ultimately raise costs for US manufacturers as well. Higher input costs could affect automakers, suppliers and workers in major US automotive states, making it harder for Washington to isolate the economic consequences of the trade conflict.

Currently, Ottawa is also building domestic and diplomatic resilience. Canada's government has introduced assistance programs for businesses and workers, while political parties and public opinion have shown broad support for a tougher stance toward Washington. Wan said these could give Ottawa more room to sustain its position during prolonged negotiations.

She added that Canada could also turn to legal and institutional mechanisms. Though such measures are unlikely to produce immediate results, it could provide additional negotiating leverage and strengthen Ottawa's political position.

Another potential avenue is coordination with other US trading partners, including Mexico and the European Union, Wan said. She analyzed that a more coordinated response could be more difficult for Washington to manage than a series of bilateral disputes, particularly if the US administration is more comfortable applying pressure on individual countries than confronting a broader coalition.

Retaliation may not change US policy

Can Canada's strategy actually force Washington to change its course? 

Wan believes the reciprocal tariffs are likely to help bring the two sides back to the negotiating table, because they create tangible economic and political pressure on the United States.

However, she cautioned that they are unlikely to produce a fundamental reversal of the Trump administration's trade policy.

Tariffs and an “America First” approach remain central to the political agenda of the MAGA movement. A major concession to Canada could therefore carry political costs for the administration and risk undermining support among its core constituency.

There is also a structural imbalance between the two economies. Canada's heavy dependence on the US market limits how far Ottawa can escalate without inflicting significant damage on itself.

That leaves Canada with a difficult balancing act: make retaliation credible enough to impose costs on Washington, but avoid turning economic interdependence into a full-scale rupture.

"The most likely outcome, therefore, may be limited compromise rather than a fundamental settlement," said Wan, adding that Canada's countermeasures could succeed in pushing Washington toward negotiations and securing concessions on specific trade issues, but they are unlikely to reverse the broader protectionist direction of US trade policy.