US-Canada Trade Tensions: Key Disputes Ahead of Tariff Deadline

Canada is bracing for a new wave of U.S. tariffs set to take effect on August 19, as Prime Minister Mark Carney's government scrambles to negotiate a reprieve. The duties, which would not be exempt under the USMCA trade pact, could hit Canadian lumber and wine exports particularly hard.

U.S. President Donald Trump has justified the tariffs as retaliation for Canadian measures ranging from retaliatory duties on American cars to provincial bans on U.S. alcohol. The move follows Washington's decision last month not to extend the USMCA, leaving the agreement subject to annual reviews amid unresolved disputes.

At the heart of the friction are several long-standing complaints outlined in the U.S. Trade Representative's 2026 National Trade Estimate report on Canada.

Dairy and supply management

The U.S. has long criticized Canada's supply-managed dairy, poultry, and egg sectors, arguing that production quotas and tariff-rate quotas restrict American market access. Tariffs on over-quota imports can exceed 200%. Washington also alleges Ottawa's administration of USMCA dairy quotas and milk pricing policies disadvantage U.S. producers. Carney's government has insisted supply management is off the table.

Buy Canadian policies

U.S. officials object to Canada's "Buy Canadian" initiative, which favors domestic firms in major government contracts for steel, aluminum, and wood. Provincial measures in Ontario, Quebec, and British Columbia that restrict U.S. suppliers in procurement competitions have also drawn criticism.

Alcohol distribution

Most Canadian provinces control alcohol sales through government liquor boards, which Washington says impose barriers like listing restrictions and pricing rules. The dispute escalated after several provinces halted U.S. alcohol distribution in response to earlier U.S. tariffs. Ontario Premier Doug Ford has said U.S. liquor will not return to shelves unless tariffs are lifted or a new trade deal is reached.

Digital services tax and streaming

Washington is monitoring Canada's digital services tax, which Ottawa promised to repeal but had not eliminated by end-2025. The U.S. also raised concerns about Canada's Online News Act, which requires digital platforms to pay news organizations, and streaming rules that mandate contributions to Canadian broadcasting. Ottawa has signaled it may soften streaming requirements to avoid higher consumer costs.

Other disputes

Additional issues include Canada's slow seed registration system, restrictions on fresh fruit and vegetable imports, and weak enforcement of forced-labor import bans. Canada remains on the U.S. intellectual property watch list, with concerns over counterfeit goods and patent protections. Washington also says Alberta's electricity market disadvantages U.S. power producers, and Canada's pharmaceutical pricing board unfairly benchmarks drug prices by excluding the U.S. and Switzerland.

With the deadline approaching, both sides face mounting pressure to bridge differences that span agriculture, energy, and digital trade.