Ohio businesses could get squeezed from both sides as Canada prepares to retaliate against Trump’s tariffs

CLEVELAND, Ohio — The United States’ trade war with Canada is about to enter a new phase, and Ohio has billions riding on what happens next.Canada will impose a new round of retaliatory tariffs on US goods beginning Sept. 8, matching President Donald Trump’s latest trade measures dollar for dollar and rate for rate. Canadian duties of 15%, 25% and 50% will target products in sectors including steel, aluminum, dairy, agricultural equipment, pulp, paper, plastics and electronics.For Ohio, this is hardly a distant fight between Washington and Ottawa.According to the US Trade Representative, Canada accounted for nearly one-third of the state’s exports last year. The country bought $18.3 billion worth of goods in 2025 alone, exceeding what Ohio sold to its next four largest foreign markets combined.Meanwhile, estimates by the National Taxpayers Union Foundation show businesses importing goods into Ohio have already incurred about $11 billion in executive tariff costs since January 2025, the ninth-highest total among states. That is equivalent to roughly $2,274 per household. Some of the tariffs included in that calculation have since been struck down, and importers have begun receiving refunds.Now, Ohio businesses face pressure from both directions: American tariffs can make Canadian materials more expensive to bring into the state, while Canadian tariffs can make Ohio-made products more expensive to sell north of the border.How did we get here?A tariff is simply a tax on an imported good. If an Ohio company imports a Canadian product subject to a 25% tariff, it pays that tariff when the product enters the U.S. The importer can absorb the added cost, negotiate with its supplier, find another source or pass some of the cost to customers. That is why a 25% tariff does not necessarily translate into a 25% increase on a store shelf.Trump has made tariffs a centerpiece of his second-term economic policy, using them for several different purposes at once.His broader argument is that decades of comparatively open trade allowed foreign countries to take advantage of the U.S., contributed to large trade deficits and weakened domestic manufacturing. His January 2025 America First Trade Policy called for reducing dependence on foreign countries, confronting what the administration considers unfair trade practices and encouraging more investment and production at home. Trump’s objective is partly to make foreign goods less attractive relative to American alternatives, giving companies an incentive to manufacture more within the country.Case Western Reserve University economics professor Jonathan Ernest, however, said the waves of tariffs and uncertainty surrounding them have not produced the manufacturing resurgence the administration envisioned.“We haven’t seen that boom and growth and reshoring of jobs that were expressed as the goal of putting those tariffs in,” he told cleveland.com. “What we have seen is some marginal increase in production in facilities we already have.” One trade war, several different tariffsThe ongoing dispute with Canada traces back to the beginning of Trump’s second term and has evolved through several rounds of tariffs. Along the way, the president has invoked different laws and offered a range of justifications for imposing them.International Emergency Economic Powers Act (1977): The trade war began early last year when Trump applied this law, which gives presidents broad economic powers during national emergencies. While it has traditionally been used for sanctions, he became the first to impose tariffs through it by arguing that Canada had failed to sufficiently curb fentanyl trafficking and illegal migration across the northern border. The plan involved a 25% tariff on most Canadian imports and a lower 10% tariff on the country’s energy, taking effect in March 2025. The Supreme Court then struck it down in February 2026 for exceeding the president’s authority under the statute. After that the administration terminated those levies and began issuing refunds.Section 232, Trade Expansion Act (1962): Originally enacted during the Cold War, this provision allows presidents to target imports that are found to threaten national security. Trump used the authority to impose tariffs on Canadian steel and aluminum during his first term, and is once again insisting that excessive reliance on foreign suppliers could weaken domestic industries needed for national defense. He raised tariffs on those same imports from 25% to 50% in June 2025, although the administration has since modified how the duties apply to some qualifying Canadian and Mexican goods.Section 338, Tariff Act (1930): The latest leverage in the trade war, this allows the president to impose additional duties of up to 50% on goods from countries found to discriminate against US commerce. Just like the International Emergency Economic Powers Act, it had never previously been used to impose tariffs despite having existed for nearly a century. Trump exercised the authority on July 20 to place additional 50% tariffs on selected Canadian goods, arguing that the country is harming American commerce through unfair treatment in the alcohol, dairy and motor vehicle markets. The resulting taxes extend beyond those categories and cover products ranging from wine to hockey sticks to cement, none of which escape the duties simply because they otherwise qualify for favorable treatment under the United States–Mexico–Canada Agreement.The escalation has been circular. Some of the Canadian measures Trump cited to justify the Section 338 tariffs were themselves retaliation for earlier actions by the U.S., including 25% tariffs on American vehicles imposed in response to U.S. auto tariffs. The Trump administration has characterized Canada’s measures as further pushback against the U.S.’s efforts to rebalance trade and protect American industry.The Section 338 tariffs went into force on Aug. 22 after both countries failed to reach a deal. Maintaining that Washington’s terms are too demanding and lopsided, Canada subsequently announced a counter-tariff package covering $27.6 billion (Canadian) in U.S. imports that is set to kick in on Sept. 8. Ohio is particularly susceptibleFor decades, Ohio and Canada have built an economy in which the border often functions less like the end of a supply chain than another stop along it.The US, Canada and Mexico largely dismantled trade barriers under the North American Free Trade Agreement of 1994, which Trump later renegotiated into the 2020 United States–Mexico–Canada Agreement. The revised deal preserved tariff-free trade while tightening rules for automobiles, adding stronger labor protections and creating new provisions governing digital trade. Over time, manufacturers have built production networks around that relatively frictionless pact.The Federal Reserve Bank of Cleveland found that Canada was Ohio’s largest export market every year from 2008 through 2024, and frequently its largest source of imports as well. Transportation equipment is particularly important on both sides of the ledger. Trade data shared by the Canadian government shows that it exports about $16.3 billion in goods to Ohio annually: $3.2 billion in crude petroleum, $1.1 billion in motor vehicle parts and $1 billion in plastics, while iron and steel alloys as well as semi-finished products total $915 million. Going the other direction, Ohio’s largest exports to Canada include engines, turbines, motor vehicle parts, plastics, automobiles, iron and steel. Kent State University economics professor Deepraj Mukherjee believes this leaves businesses vulnerable on both ends.“A unilateral US tariff on Canadian imports raises costs for American businesses and consumers who rely on Canadian goods, resulting in significant financial strain,” he told cleveland.com. “The introduction of retaliatory measures significantly alters the situation, exposing Ohio’s export market to similar pressures.”An Ohio manufacturer, he explained, could pay more to import Canadian steel or aluminum because of a US tariff. It then could face weaker Canadian demand for its finished machinery or auto parts because Canada has placed a tariff on those exports.Cars face a two-pronged threatThe auto industry is among the most deeply integrated across the US–Canada border. Vehicle parts can move between plants in both countries at different stages of manufacturing, and the entire network has operated on that presumption of free movement for decades.Ohio State University trade economist Ian Sheldon said parts can cross the border multiple times before a finished vehicle reaches a customer, and so tariffs on that trade can make those longstanding production relationships more expensive or eventually push companies to restructure their supply chains.Transportation equipment was Ohio’s largest manufacturing export category in 2025 with a total of $18.8 billion, although the state’s reliance on the auto industry is also reflected in its tariff costs. About 75% of Ohio’s estimated executive tariff costs have fallen on raw materials, parts and equipment used by manufacturers, according to the National Taxpayers Union Foundation.Estimated monthly tariffs on imports into Ohio, broken down between statutory and executive tariffsNational Taxpayers Union Foundation (Aug. 4, 2026 · Data through Q2 2026)A new Axios analysis based on data from Trade Partnership Worldwide found that auto parts account for roughly $1.5 billion of the $11 billion in estimated tariff costs for Ohio.Sheldon questioned why the U.S. is making trade with its North American partner more difficult at a time when China has emerged as a dominant force in global automobile production, particularly electric vehicles.“We should be working together to take on China in this market,” he told cleveland.com. “I’m a little bit puzzled by this trade war.”Agriculture is under pressure, tooWhile manufacturing is Ohio’s most obvious vulnerability in the trade war, the state’s farmers and food producers face substantial exposure as well.According to 2024 data shared by the Canadian government, the country trades about $2.9 billion in agriculture and agri-food products with Ohio each year. The state concurrently sends roughly $1.3 billion worth of those goods — broths, pet food, prepared pork — to Canada, which accounts for 45% of Ohio’s agriculture and agri-food exports under that dataset.Canadian retaliation could make targeted American products less competitive there, forcing exporters to accept lower margins, lose customers or pursue other markets.“Companies will diversify their suppliers and customers away from affected regions, sourcing materials from Europe or Asia rather than Ontario and seeking export markets outside North America,” Mukherjee said. “Firms may also relocate production to regions unaffected by disputes to avoid high tariffs.”When will shoppers notice?Tariff costs rarely move straight from the border to a consumer’s price tag overnight.Businesses may initially sell inventory purchased before a tariff took effect, absorb part of the increase through smaller profit margins or pressure suppliers to reduce prices. Additionally, existing contracts can lock in prices for a period of time and delay when higher costs show up in prices. Most companies, however, have only so much room to accommodate those changes.The Budget Lab at Yale estimates that current US tariff policy will ultimately raise consumer prices by about 0.7% and cost the average household roughly $1,100 annually. “This spat with Canada is likely to raise prices again,” Sheldon said, noting that it would be particularly difficult for lower-income households because imported goods account for a larger share of their budgets. Mukherjee expects a rise in prices sooner than a decline in employment. Over a longer period, he said, businesses facing persistently higher costs and weaker export markets could reduce hiring, delay investments or look for suppliers and customers elsewhere. Canada’s trade data already shows signs of that shift. In 2025, goods exported to the U.S. fell by C$29.4 billion (5.4%) while shipments to other countries rose by C$27.6 billion (15.8%).For instance, Canada supplies the US with substantial amounts of forest products used throughout paper supply chains, while its upcoming retaliation includes tariffs on related U.S. exports. Ernest said everyday items like paper towels and toilet paper illustrate how deeply routine purchases can be tied to Canadian trade.“I think Canada is doing it in a reasonably strategic, thought-out way,” he said. “People will notice and feel it, especially in large trading partners like Ohio.”Small businesses have less room to maneuverLarge corporations may be able to negotiate better prices, move production between countries or spread costs across sprawling supply chains. Small businesses, on the other hand, have limited options.That matters particularly in Ohio, where 87% of companies that exported goods in 2024 were small and medium-sized businesses with fewer than 500 employees, according to the U.S. Trade Representative.Shawn Phetteplace, national campaigns director for the small-business advocacy group Main Street Alliance, told cleveland.com that many imported components simply do not have competitively priced American substitutes.“Building U.S. manufacturing capacity takes years, not months, and in some cases isn’t feasible at all,” he said. “So, when a 30% or 145% tariff lands with no phase-in period, a small business has nowhere to hide from it the way a Fortune 500 company might.”A survey conducted by his organization found 81.5% of respondents expected to raise consumer prices to offset tariff costs, 41.7% planned to delay expansion and 31.5% anticipated layoffs, while only 14.6% considered shifting production to the U.S. a viable option. Those challenges are more than theoretical for EarthQuaker Devices, an Akron manufacturer that makes about 50,000 guitar pedals a year and exports to 55 countries. Now, the constantly shifting tariff rates have made something as basic as setting a price for a product launching several months later far more difficult. CEO Julie Robbins told cleveland.com that her company uses more than 1,000 components sourced from around the world. Few of its Canadian parts are directly caught in the newest restrictions, but the accumulated tariffs have increased costs while the escalating dispute threatens sales in one of the company’s most important export markets.“This latest round of tariffs, the trade war with Canada, is just placing a barrier between us and one of our largest markets,” she said.What happens next?For now, neither side appears ready to blink.After rejecting the latest terms put forth by the U.S., Canada suspended negotiations and paired its Sept. 8 counter-tariffs with billions of dollars in support for affected businesses and workers. The Trump administration maintains that tariffs can secure better trade terms, protect American production and pressure Canada to end what it considers discriminatory treatment.The counterargument from skeptics is that tariffs can also make American companies less competitive by raising the price of the materials they need, while retaliation closes off foreign customers at the same time. For smaller players, those pressures can be particularly difficult to absorb.“Escalation just tightens a vise that’s already closed on a lot of these businesses,” Phetteplace said. “Employees feel it first, through cut hours or hiring freezes, before it shows up as layoffs. Customers feel it last, in higher prices, but by the time it reaches them, the business has usually already cut everything it can behind the scenes.”In Ohio, that experiment is playing out in unusually stark fashion. The state has spent decades selling automobiles, machinery, chemicals and agricultural goods into Canada while buying the country’s oil, metals, plastics and vehicle parts to keep its own economy running.Beginning Sept. 8, targeted goods Ohio sends north will face new or additional costs at the border.