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As U.S. Tariffs Become Reality, Canadians Prepare for Economic Pain
The trucks that carry about $300 million worth of auto parts each day over the bridge from Windsor, Ontario, to Detroit are still rolling as usual. But in the aftermath of President Trump’s decision to impose 25 percent tariffs on most categories of Canadian exports, the mood in Windsor, like all of Canada, was transformed.
Mr. Trump’s move has ignited a sense of economic anxiety and anger among Canadians about how they are being treated by their neighbor, ally and best customer. Most are still puzzling over Mr. Trump’s motivations and objectives for the tariffs, as well as his comments about annexing Canada as the 51st state.
And as they turned their attention to getting the potentially crippling tariffs, and a 10 percent levy on Canadian oil and gas and some minerals, lifted, politicians, business people and ordinary Canadians say that the relationship between the two countries will never return to what it once was.
Flavio Volpe, the head of a Canadian auto-parts maker trade group, said that his members could start shutting down factories in days, and that he feels betrayed by the United States.
“We’ve built two societies on the same values,” said Mr. Volpe, who is also a member of Prime Minister Justin Trudeau’s Council on Canada-U.S. Relations. “The man in the White House did a U-turn and drove right over us.”
Mr. Trudeau and anxious business leaders throughout Canada said that their country’s focus must be on ending the tariffs as quickly as possible.
Most forecasts project that Canada’s export-dependent economy will be sent into a recession, although they differ on timing and its initial severity.
“We have a limited experience for this magnitude of a trade shock,” the Royal Bank of Canada, the country’s largest financial institution, said this week. Some Canadians reached back for comparison to the Smoot-Hawley tariffs of 1930, which raised the average U.S. import duty to a staggering 59.1 percent. Many economists believe that they worsened the Great Depression, but the two countries’ economies were far less integrated at that time.
Aside from oil and gas, Canada’s largest export sector is the auto industry. On Tuesday, Mr. Trump suggested that the only way out of tariffs for the sector is to move all of its production to the United States. Aside from abandoning a skilled work force, that would require billions of dollars in new investments.
Historically, automotive trade has been largely balanced between the United States and Canada. Parts often swirl around between Canada, the United States and Mexico, sometimes crossing borders repeatedly before winding up in vehicles in a dealer’s showroom.
Mr. Volpe, of the Automotive Parts Manufacturers’ Association in Canada, said that, aside from the tariffs, trade remained unchanged on Tuesday, an assessment backed up by the usual migration of trucks to the Ambassador Bridge.
The 25 percent tariffs are being paid by the importers, either other parts makers or automakers. Most contracts allow an automaker to deduct tariffs it pays when settling a parts company’s bill.
Mr. Volpe said that those deductions will make parts suppliers, which have generally have single-digit profit margins, instantly and deeply unprofitable.
He expects that most of his members can cover those losses from their cash reserves for about a week. After that, they will be forced to stop shipments.
“No one is going to burn up their cash reserve for the president of the United States,” he said.
For more parts, automakers usually have no alternative suppliers, let alone ones in the United States. Setting up new suppliers would take time and substantial investment. The result, experts say, will be a parts shortage that rapidly cascades into assembly-line shutdowns. Thousands of workers in Canada, the United States and Mexico would be left idle.
Some industries began idling small numbers of workers before the tariffs came into effect.
Bill Slater, the president of a United Steelworkers local in Sault Ste. Marie, Ontario, said that Algoma Steel laid off about 20 of his members who are salaried employees, citing the tariffs. He said that a number of probationary hourly workers were also let go by the mill.
Truck drivers had a mixed experience. Stephen Laskowski, the president of the Ontario Trucking Association, said that some had a surge in business as companies moved to get products into the United States before the tariffs came into effect, while others were laying off drivers because customers were canceling shipments.
Canada’s forestry industry knows tariffs all too well. Special U.S. duties on softwood lumber go back decades and were a factor in Canada seeking the 1989 free trade agreement with the United States, which was later expanded to include Mexico. (Canada has repeatedly failed to get an exemption from the U.S. trade complaints system that imposes the softwood lumber tariffs.)
But Kurt Niquidet, the president of the British Columbia Council of Forest Industries, said that adding the 25 percent tariff “really puts us into unprecedented territory.”
Lumber mills in the western province are facing a dizzying array of tariffs. This week’s 25 percent tariff is on top of a 14.4 percent tariff that the U.S. government expects to raise this summer, to more than 27 percent. Then Mr. Trump announced last weekend that he’s opened an investigation into lumber imports that could result in even more tariffs.
While the United States supplies about 70 percent of its own lumber, Mr. Niquidet, an economist, said that American forests and mills cannot replace all the lumber from Canada, nor can it be sourced from other countries.
“There will still be imports from Canada,” he said. “Prices in the U.S. will rise.” Some Canadian lumber mills, however, may not survive the trade assault, he added.
While Mr. Trudeau speculated that Mr. Trump was seeking a “total collapse of the Canadian economy, because that’ll make it easier to annex us,” Mr. Volpe said he was not sure it’s that complicated. “If it looks like he is dismantling the structure of the postwar economy, then he is,” Mr. Volpe said. “What are you going to do about it?” Some Canadians believe that their country is simply being used as part of Mr. Trump’s plan to fund substantial U.S. tax cuts with tariffs.
Jean Simard, the president of the Aluminum Association of Canada, fought a successful battle over the 10 percent tariff on Canadian exports of the metal Mr. Trump enacted in during his first administration. Now Mr. Simard is attempting to fend off additional tariffs that Mr. Trump has promised to put on top of Tuesday’s 25 percent. He said that he believes the president is telling the world: “This is what I’m able to do to my closest allies — think about what’s awaiting you.”
Mr. Simard added: “It’s an old barbarian approach to war.”
As the tariffs were rolled out, actions against American goods quickly came into play. Government-owned liquor stores, including in Ontario, pulled U.S. beer, wine and spirits from off their shelves, and that province canceled a 100 million Canadian dollar ($69 million) contract with Elon Musk’s Starlink satellite service to provide internet in rural areas.
Some Canadians are also vowing not to travel south, a decision perhaps also informed by the decline of the Canadian dollar brought on by the tariffs.
Most winters, Lee Miller, a retired electrician from Saint John, New Brunswick, would be traveling in his motor home through sunny warm states, including Florida.
“As soon as Trump started talking tariffs, I said, ‘Nope, not going,’” Mr. Miller said. After canceling this year’s trip, he plans not to enter the United States as long as Mr. Trump is president. That will, however, mean missed visits with friends and family who live across the border.
“This is one of those things that tears families apart,” he said.
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Kuwait decried Iranian attacks in a statement issued by its foreign affairs ministry, saying that the Kuwait International Airport had been targeted.
“The Ministry of Foreign Affairs expresses the State of Kuwait’s condemnation and denunciation, in the strongest terms, of the brutal and ongoing Iranian attacks using ballistic missiles and drones, the latest of which occurred at dawn today, targeting once again civilian and vital facilities, including Kuwait International Airport, resulting in the death of one individual, injuries to others, and damage to vital facilities, including diplomatic missions,” part of the statement declared, according to a translation of the Arabic-language post on X.
Kuwait’s Ministry of Defense spokesperson had indicated that a building at Kuwait International Airport was damaged and people were injured, according to a post on X by the official account of Kuwait Army general staff headquarters.
IRANIANS SPEAK OUT OVER POSSIBLE TRUMP-REGIME DEAL
People are seen at Kuwait International Airport in Kuwait City, Kuwait, on June 1, 2026. (Jaber Abdulkhaleq/Anadolu via Getty Images)
“The Official Spokesman for the Ministry of Defense, Brigadier General Saud Abdulaziz Al-Otaibi, stated that a number of hostile drones targeted today the passenger building (T1) at Kuwait International Airport as a result of the criminal Iranian aggression, which resulted in significant material damage to the building and injuries to a number of individuals, who received the necessary medical care,” according to a translation of the Arabic-language post.
“He affirmed that the armed forces are monitoring the situation in coordination with the relevant authorities, and they are in a state of complete readiness to deal with any developments, and to take all necessary measures to preserve the security of the country and its stability,” the post added.
The Iranian hostilities come more than three months since the start of the U.S. war against the Islamic Republic.
In a Tuesday statement, U.S. Central Command (CENTCOM) indicated that America had engaged in “self-defense strikes” against Iran.
US MILITARY ATTACKS IRAN IN ‘SELF-DEFENSE STRIKES’ OVER WEEKEND
Imam Sadiq (AS) mosque with a giant Iranian flag installed on its front at the Palestine Square in Tehran on April 19, 2026. (ATTA KENARE / AFP via Getty Images)
“U.S. forces successfully defeated multiple Iranian ballistic missiles and drones, and conducted self-defense strikes on Qeshm Island in response to attempted attacks by Iran across the Middle East, June 2. Iran launched several ballistic missiles toward regional neighbors; however, all failed to hit their intended targets. Two Iranian missiles fired at Kuwait fell short or broke apart enroute, and three missiles launched at Bahrain were immediately intercepted by U.S. and Bahrain air defense forces,” the release noted.
“Moments earlier, U.S. Central Command (CENTCOM) forces shot down three one-way attack drones launched by Iran toward civilian mariners that were rightfully transiting regional waters. American forces also conducted self-defense strikes on an Iranian military ground control station on Qeshm Island. No U.S. personnel were harmed. CENTCOM forces remain vigilant and ready to defend against unwarranted Iranian aggression during the ongoing ceasefire,” the statement added.
TRUMP INSISTS IRAN TALKS ARE ON, SAYING DEAL IS ‘NOT A SIMPLE THING’
Secretary of War Pete Hegseth listens as Adm. Brad Cooper, commander of U.S. Central Command, speaks during a press briefing at the Pentagon on April 16, 2026, in Arlington, Va. (Alex Wong/Getty Images)
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CENTCOM noted in a post on X that, “An additional wave of Iranian drones attempting to attack U.S. forces in Kuwait failed to impact intended targets tonight. U.S. Central Command air defenses successfully downed multiple drones and ensured no American personnel or assets were harmed.”
The European Commission has presented a sweeping package to boost homegrown technologies and reduce dependency on American and Chinese companies. Whether it will make a meaningful difference — and how the two superpowers will react — remain open questions.
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The EU imports most of its tech services and products from abroad. The digital market is dominated by US giants such as Google, Microsoft and Apple, and Chinese conglomerates such as Alibaba and TikTok-owner ByteDance.
“We live in a world where geopolitics and technology are inseparable. Those who champion technological innovation will shape the future, and we must ensure that Europe plays a leading role in this,” European Commission Executive Vice President Henna Virkkunen said.
The package seeks to boost Europe’s domestic tech sector, with a heavy focus on cloud infrastructure, AI services, open source and chips.
In his landmark report on the languishing state of the European economy, former Italian Prime Minister Mario Draghi argued that most of the recent divergence in GDP growth between the EU and the US could be explained by digital technologies.
Having missed the first wave of the digital economy — the internet-driven services boom — Draghi warned that Europe’s last chance to rejoin the international tech race was not to be missed, namely the transformative potential of artificial intelligence.
While growing dependency on foreign technologies had been widely known among European decision-makers for decades, US President Donald Trump’s assertive trade agenda and China’s willingness to weaponise such dependencies have provided fresh momentum.
Will Brussels’ move be enough to shift the dial, or is it too little too late? And what will be the economic cost of severing deeply entrenched dependencies if the EU draws the ire of Washington and Beijing?
What’s in the package?
The main target of the European Commission’s proposal is the cloud sector, which provides the physical infrastructure underpinning most digital services. Amazon, Microsoft and Google account for 80% of the European market, with EU-based providers relegated to the margins.
The draft law introduces four different levels of digital sovereignty that public authorities must consider when purchasing cloud services, depending on how sensitive the use case is.
The highest tier, covering sectors such as defence and healthcare, would effectively bar non-European companies from winning public contracts. The aim is to prevent a so-called “kill switch” scenario, the risk that a foreign government might simply cut off access to hospitals or fighter jets.
For MEP Axel Voss (EPP/Germany), the Commission’s approach is both bold and pragmatic. “Building genuine European cloud and AI sovereignty is overdue, and giving our providers a fair seat at the table in strategic public tenders is the right instinct,” he said.
Europe also needs to catch up on chips — the fundamental components at the heart of almost every electronic device. The most advanced chips, used to develop cutting-edge AI technologies, are designed in the US and produced in Taiwan or South Korea.
After the first Chips Act failed to significantly bring semiconductor factories back to Europe through state subsidies, the Commission is trying again — this time focusing on stimulating demand for European chips, on the assumption that supply will follow.
Certain key sectors, such as automotive, will also be required to diversify their chip suppliers in certain circumstances, as part of a broader effort to reduce reliance on Chinese-subsidised producers accused of flooding the market through dumping.
Will it be effective?
The guiding principle of the initiative is AI — the transformative technology that, much like the internet before it, is reshaping the digital economy. Cloud data centres and chips provide the essential infrastructure for the next generation of AI.
Yet the AI market is dominated by the likes of OpenAI, Anthropic and DeepSeek. A European preference in lucrative defence contracts could serve as a lifeline for Mistral AI, the only EU-based company at the cutting edge of the AI race.
The EU lags significantly behind in data centre construction needed to meet expected demand for AI services in the coming years, held back by a mix of slow permitting, high energy costs and a scarcity of available land.
“Europe cannot regulate its way out of technological dependency,” MEP Matthias Ecke (S&D/Germany) told reporters. “It must build its own capacity, overcoming one-sided dependencies and restoring a genuine choice for businesses and consumers alike.”
At the same time, the EU is set to join a US-led initiative, Pax Silica, to secure chip supply chains, in recognition that Europe cannot do without Nvidia chips in the short term.
That dependency could nonetheless prove self-perpetuating: regulators and rivals warn that Nvidia tends to build a closed ecosystem that is difficult to break away from.
Will there be a backlash?
The concept of technological sovereignty originated in French defence circles, rooted in the idea of developing an autonomous nuclear deterrent. The debate spilled over into digital technologies — given their dual-use potential — during Trump’s first term.
A stark wake-up call for EU policymakers came when, after the International Criminal Court issued an arrest warrant for Israeli Prime Minister Benjamin Netanyahu, the US administration sanctioned several ICC officials — cutting them off from American services woven into daily life, such as Visa, Amazon and Uber.
As Washington has grown more explicit about weaponising critical dependencies, concerns about retaliation against any treatment of US firms deemed unfair have mounted.
Commission insiders, however, consider the US front largely pacified by the EU-US Turnberry agreement, which broadly favours the American side, and say the tone behind the scenes in recent weeks has been far more constructive than the public outbursts suggest.
On the China front, the tech sovereignty debate is just one thread in a far broader tapestry of strained relations between Brussels and Beijing, with discussions around a potential trade war reaching a fever pitch in recent weeks.
Both Washington and Beijing have weaponised strategic dependencies in what analyst Mark Leonard has called the Age of Unpeace. Yet neither superpower can afford to lose access to Europe’s main strength: one of the world’s largest and most lucrative markets.
Where is Europe headed?
In the complex chip value chain, Europe still controls critical chokepoints, most notably through Dutch company ASML, which holds a near-monopoly on the industrial machinery essential to chip production.
The package also includes a strategy to leverage open-source technologies, which could help the EU overcome its fragmented tech landscape — one that has yet to produce a company capable of directly competing with Silicon Valley’s giants with an integrated offering.
Still, the lack of a scalable European single market and access to capital are frequently cited by European start-ups as the main reasons they move abroad — issues the Commission is attempting to address through the EU Inc. proposal and the capital markets union.
In short, the EU faces structural problems dragging its tech sector back. The sovereignty package addresses some of them while attempting to leverage Europe’s own strengths, conscious that complete autonomy in a globalised world is unrealistic.
For instance, Japan coined the concept of “strategic indispensability,” which emphasises controlling critical leverage points.
“The target is to achieve something visible by 2030,” Virkkunen said. “80% of technology is coming from outside Europe. We will not change that overnight.”
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