Risky Business with Canada

The trade dispute between the U.S. and Canada escalated after talks between the two countries recently broke down. Each country has placed tariffs on imports from the other and President Trump has stopped the import of certain Canadian goods. The conflict isn’t good for either country’s economy. The two countries are inextricably linked through trade. Canada buys roughly 15% of all American exports and is the top export destination for 34 states. It is also one of the largest markets for American agricultural products, importing about $28 billion last year. Nebraska exported $1.5 billion in goods to Canada in 2025, making it the second-largest market for Nebraska products. The bulk of the exports are farm machinery, ethanol, and meat.  

Thus far, the consequences from the dispute have been moderate for Nebraska. Increased U.S. tariffs on wood products, motor vehicles, steel, and aluminum have contributed to higher prices on goods purchased by Nebraskans. But important Canadian imports like potash and energy continue to be exempt, although additional Canadian tariffs on agricultural equipment will make farm machinery from Nebraska more expensive and affect sales.  

However, the costs to Nebraska could rise considerably if the conflict further escalates. U.S. imports of potash or exports of ethanol or meat could become entangled in the conflict through additional tariffs or stoppages. There’s also the risk the dispute derails the U.S.-Mexico-Canada Trade Agreement (USMCA). President Trump decided not to renew the agreement during the mandatory six-year joint review earlier this year, shifting the framework into a process of annual reviews. But despite the action, the existing trade pact remains fully in force. The administration is now pursuing separate bilateral agreements instead of three-country talks. At the same time, Canada has made overtures to the European Union about joining as an associate member. It seems Canada is preparing for further trade disruption with the U.S.

Figure 4. Value of Nebraska Exports to Canada & Mexico

Nebraska farmers and ranchers have a strong stake in the outcome of the USMCA discussions as well as the dispute with Canada. Mexico and Canada are Nebraska’s largest export customers accounting for around 25% of all total export goods. Last year the two countries combined to import over $3.5 billion in Nebraska products. The discontinuance of USMCA or further break with Canada would be costly. President Trump’s blockage on the import of Canadian whiskies already is hitting too close to home.