As President Donald Trump's trade war with Canada escalates, questions remain about what exactly is a tariff, and what are the possible ramifications of an extended increase with our northern neighbors?
"We're gonna have a great relationship with Mexico, we actually have a good one with Canada, but the United States has been ripped off for 50 years by Canada. We don't need their product, and they need our product," claimed President Donald Trump last week during a visit to Ireland.
President Trump was asked about the trade relationships with Mexico and Canada in the wake of the breakdown of trade talks with Canada and the hiking of tariffs by President Trump on Canadian products and retaliatory tariffs by Canada on American products. It's been an ongoing back-and-forth between the two formerly friendly neighbors since the beginning of Mr. Trump's second term in the White House.
For states like Maine, Michigan, and Minnesota, state's that share borders and important trade deals with Canada, there's an outsized effect on local economies, according to University of Minnesota Law and Business Professor Paul M. Vaaler.
He helped break down some of the basics when it comes to new tariffs from both countries, and says that in simplest terms, "Tariffs are taxes on imports, particularly imports of goods."
Vaaler says Minnesota and other border states may be disproportionately affected now that Canada has struck back with its own tariffs.
"We export somewhere around $5 billion of goods every year to Canada," Vaaler explains. "It's probably our most important trading partner. So, the taxes that tariffs are, make that trade more expensive, and decrease the demand for our goods."
Minnesota has a wide range of industries that depend on trade with Canada. That includes things like iron ore from mining, potash which is a fertilizer Minnesota's Ag community depends on, aluminum and steel imports from Canada, and especially Canadian oil.
Vaaler says those diverse industries is actually a detriment when it comes to tariffs.
"General tariffs affect a generally diverse economy like Minnesota has, more than it would in a state that had one or two particular industries that dominate," Vaaler explains.
Are there benefits to tariffs? Vaaler says yes, if targeted. And he says tariffs were actually a major source of revenue for the country up until the income tax system was created. But U.S. citizens already pay income tax, and using these tariffs to create more revenue for the U.S. is simply forcing consumers to foot even more of the bill.
"We have over $2.1 trillion being invested in our country. No country ever, ever, no matter where, no matter what country, has ever even come close to that," President Trump recently claimed. "We have $21 trillion, close to $21 trillion, actually. And it's coming in at levels that nobody's ever seen before."
Those numbers are not even close to accurate, however. The U.S. government has taken in $167.3 billion in net tariff revenue during the first 11 months of fiscal year 2026, according to recent data from the U.S. Treasury Fiscal Data platform.
And as Vaaler points out, those tariff costs are being passed down to consumers. Recent economic data and studies by the Federal Reserve Bank of New York and the Kiel Institute for the World Economy show that roughly 90% of the cost of recent U.S. tariffs falls on American buyers.
Collections have also been heavily offset by large court-ordered refunds following a Supreme Court decision striking down certain emergency tariffs (IEEPA duties). The government has paid out roughly $115 billion in refunds since May. That money has gone back to the businesses affected, including Minnesota-based Target who received $1 billion.
The tariff refunds going back to the companies does little to help consumers, but several have made promises to lower prices on some goods, including Target, Walmart, and more.
"So it's really about the preferences of the president right now," Vaaler said. "He is determined to use tariffs for collection of revenue and to bring, he believes, businesses, especially manufacturing businesses, back from overseas to the United States, so-called reshoring."
That, according to experts, is going to take years, or even decades. The high costs associated with it, and a more global economy perhaps even making it impossible. The U.S. infrastructure needed to support something blue-collar manufacturing hasn't been in place since the 1970s.
But add it all up, and it's at best confusing, and at worst is causing irreparable harm to future trade between the two countries.
Is there an end in sight? Vaaler says that's not likely.
"A trade war ends when both sides want it to," he adds.
