The trade relationship between Canada and the United States has reached a critical flashpoint as of 12 February 2026. Following weeks of economic tension, the U.S. legislative branch has delivered a direct challenge to President Donald Trump’s aggressive tariff regime, while the White House signals a potential withdrawal from the continent’s primary trade pact.
U.S. House Votes to Rescind Tariffs
In a rare bipartisan rebuke on 11 February 2026, the U.S. House of Representatives voted 219 to 211 to overturn President Trump’s tariffs on Canadian goods. The resolution specifically targets the 35% levies imposed under the International Economic Emergency Powers Act (IEEPA), which the President had justified through a “fentanyl emergency” declaration.
Key details of the legislative push include:
- Bipartisan Defiance: Six Republican lawmakers crossed party lines to join Democrats in voting against the White House agenda.
- Scope of Tariffs: The current measures include a 35% tariff on most Canadian goods, with a reduced 10% rate applied to essential commodities like oil, gas, and potash.
- Symbolic Weight: While the measure now moves to the Senate, President Trump is widely expected to exercise his veto power, maintaining the trade barriers for the immediate future.
CUSMA Under Threat
The stability of the Canada-United States-Mexico Agreement (CUSMA) is currently in jeopardy. Reports emerged this week that President Trump is privately weighing a total withdrawal from the trade deal he originally negotiated in 2018. This uncertainty has sent ripples through the Canadian economy, with Bank of Canada Governor Tiff Macklem warning that the loss of preferential trade access would likely trigger a domestic recession.
U.S. Treasury Secretary Scott Bessent has further complicated negotiations, stating that the U.S. would “absolutely not” drop all tariffs even if Canada offered reciprocal removals. Bessent cited Canada’s recent trade dealings with China regarding Electric Vehicles (EVs) as a primary reason for the administration’s hardline stance.
Economic Impact and Outlook
The “trade war” atmosphere of early 2026 is already impacting Canadian markets. Analysts suggest the housing market remains “subdued” due to the overarching economic uncertainty, with a potential recession looming later this year if trade flows are not restored.
| Sector | Current Tariff Status | Impact Level |
|---|---|---|
| Steel & Aluminum | 35% | Critical |
| Oil & Gas | 10% | Moderate |
| Potash | 10% | Low |
| General Manufacturing | 35% | High |
Historical Context
The current dispute marks the most significant disruption in cross-border commerce since the 1989 Canada-U.S. Free Trade Agreement (CUSFTA) and the subsequent 1994 NAFTA. While Canada has historically maintained a trade deficit in goods with the U.S. since 1985 (excluding services), the integration of the two economies makes the current 35% tariff wall unprecedented in the modern era.
Last Updated: 12 February 2026