Canada and the United States have been embroiled in a tariff war for the better part of a year. Starting when Donald Trump took office as U.S. President in January 2025, the U.S. imposed a series of tariffs on Canada, each more punishing than the last. Canada for its part responded by raising tariffs on the U.S. and negotiating trade deals with China.
Most Canadians see the U.S.-Canada tariff war as a major negative. Opinions of the United States plummeted after Trump raised tariffs on Canada, and individual Canadians boycotted American goods, a move that served as an unofficial counter-measure in the trade war. The economy has performed worse than normal since the “war” began.
At the same time, there is a silver lining to the U.S.-Canada tariff war. Although the war’s immediate economic impact has been negative, it forced Canada to reconsider its trade relationships and lower tariffs on countries like China. Thanks to the lowering of tariffs on Chinese electric vehicles (EVs), 49,000 of these vehicles are slated to enter Canada, so far all of them from BYD. In this article I explore this and other silver linings in the Canada/U.S. trade war.
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Lower auto tariffs
Probably the biggest positive to come out of the U.S.-Canada trade war has been the lowering of tariffs on Chinese EVs to a mere 6.1%. These vehicles, known for their high quality and low prices, were previously tariffed at a whopping 100%. Now they’re tariffed at a mere 6.1%, which makes them not that much more expensive than they are in China. Already, BYD has registered to import EVs to Canada, and 49,000 of its vehicles are slated to hit the Canadian market this year. Low-priced, environmentally friendly vehicles await.
New supply chains
Another positive of the U.S.-Canada tariff war is new supply chains. When Donald Trump tariffed Canadian energy at 10%, policymakers immediately recognized that the country needed to find new buyers. That was shortly followed by an increase in oil shipments to China through the Trans Mountain pipeline, along with plans to build out new pipelines serving the Asian markets. Funnily enough, U.S. companies such as Kinder Morgan have been among the leading players in these projects.
Banks largely unaffected
Purely from an investing point of view, Canadian banks have also done relatively well amid the U.S.-Canada tariff war. In this case, the tariff war has not affected prosperity in any direct or measurable way, but it has not prevented it. This speaks to the resilience of Canadian financial institutions.
Take Royal Bank of Canada (TSX: RY), for example. As Canada’s largest bank, it performed extremely well in 2025, despite U.S. tariffs on Canada increasing many times over the course of the year. In its most recent quarter, RY’s revenue increased 15%, earnings per share (EPS) increased 25%, and common equity 7.9%. Its net income margin was 32.7% and return on equity (ROE) was 16%. Both of these profitability measures increase on a year-over-year basis; for example, ROE increased 14% compared to the year-ago period. So, Royal Bank of Canada clearly thrived amid the U.S.-Canada tariff war. That speaks to a resilient company that should be able to survive the worst the economy has to throw at in the year ahead.
