Canada and the US have been embroiled in a tariff battle for the higher a part of a 12 months. Beginning when Donald Trump took workplace as U.S. President in January 2025, the U.S. imposed a sequence of tariffs on Canada, every extra punishing than the final. Canada for its half responded by elevating tariffs on the U.S. and negotiating commerce offers with China.
Most Canadians see the U.S.-Canada tariff battle as a serious destructive. Opinions of the US plummeted after Trump raised tariffs on Canada, and particular person Canadians boycotted American items, a transfer that served as an unofficial counter-measure within the commerce battle. The economic system has carried out worse than regular for the reason that “battle” started.
On the identical time, there’s a silver lining to the U.S.-Canada tariff battle. Though the battle’s speedy financial impression has been destructive, it compelled Canada to rethink its commerce relationships and decrease tariffs on international locations like China. Because of the reducing of tariffs on Chinese language electrical automobiles (EVs), 49,000 of those automobiles are slated to enter Canada, to this point all of them from BYD. On this article I discover this and different silver linings within the Canada/U.S. commerce battle.
Decrease auto tariffs
Most likely the largest constructive to come back out of the U.S.-Canada commerce battle has been the reducing of tariffs on Chinese language EVs to a mere 6.1%. These automobiles, identified for his or her prime quality and low costs, have been beforehand tariffed at a whopping 100%. Now they’re tariffed at a mere 6.1%, which makes them not that rather more costly than they’re in China. Already, BYD has registered to import EVs to Canada, and 49,000 of its automobiles are slated to hit the Canadian market this 12 months. Low-priced, environmentally pleasant automobiles await.
New provide chains
One other constructive of the U.S.-Canada tariff battle is new provide chains. When Donald Trump tariffed Canadian vitality at 10%, policymakers instantly acknowledged that the nation wanted to seek out new consumers. That was shortly adopted by a rise in oil shipments to China by means of the Trans Mountain pipeline, together with plans to construct out new pipelines serving the Asian markets. Funnily sufficient, U.S. corporations comparable to Kids Morgan have been among the many main gamers in these initiatives.
Banks largely unaffected
Purely from an investing standpoint, Canadian banks have additionally carried out comparatively effectively amid the U.S.-Canada tariff battle. On this case, the tariff battle has not affected prosperity in any direct or measurable approach, but it surely has not prevented it. This speaks to the resilience of Canadian monetary establishments.
Take Royal Financial institution of Canada (TSX:RY), for instance. As Canada’s largest financial institution, it carried out extraordinarily effectively in 2025, regardless of U.S. tariffs on Canada rising many occasions over the course of the 12 months. In its most up-to-date quarter, RY’s income elevated 15%, earnings per share (EPS) elevated 25%, and customary fairness 7.9%. Its web revenue margin was 32.7% and return on fairness (ROE) was 16%. Each of those profitability measures improve on a year-over-year foundation; for instance, ROE elevated 14% in comparison with the year-ago interval. So, Royal Financial institution of Canada clearly thrived amid the U.S.-Canada tariff battle. That speaks to a resilient firm that ought to be capable of survive the worst the economic system has to throw at within the 12 months forward.