When it comes to trade with the U.S., Canada has its ‘elbows up’ 

“Elbows up” has come to represent Canada’s stance in its trade war with the U.S. But Prime Minister Carney has said there’s a limit to how far Canada can go in matching U.S. tariffs tit-for-tat.

Matching tariffs—or going “dollar for dollar”—means imposing tariffs equal in value to those set by another country. It’s calculated by multiplying the value of imports by the tariff rate imposed on them.

Though the Canadian response has been described as measured, since February, Canada has consistently countered each new U.S. tariff with an equivalent measure of its own.

In response to the first round of tariffs, a 25 percent levy on non-CUSMA-compliant goods (a tariff originally imposed on all goods then scaled back), Canada responded with a 25 percent tariff on $30 billion of goods. Following the 25 percent tariff on steel and aluminum, Canada countered with a 25 percent levy on another $29.8 billion of U.S. goods. More recently, when the U.S. went after autos (specifically, finished vehicles), Canada likewise responded with an equivalent measure in retaliation.

That leaves the two pretty evenly matched. Excluding autos (the most difficult piece to estimate), the U.S. has imposed around $15 billion (in Canadian dollars) in tariffs on Canada, while Canada has imposed roughly $15 billion in return.

Including tariffs on autos (which requires a little more guesswork on how much of the “content” of a finished vehicle was produced in the U.S.) increases U.S. tariffs relative to Canadian ones simply because Americans buy more cars than we do. Even so, our best guess is that for every dollar in tariffs on Canada, there are about 80 cents of tariffs on the U.S.

But unlike the elbows-up approach in hockey, retaliatory tariffs don’t just defend Canada, they hurt Canadians, as the prime minister himself has stated.

Tariffs are a tax on imports. And, because the tariffs Canada has imposed on the U.S. generally target consumer goods, rather than business inputs, research suggests they’re likely to hit Canadian pocketbooks more quickly and sharply. Consumers may be able to find alternatives, but generally, shoppers will face higher prices and fewer options.

A key limitation for Canada in deciding how much to retaliate is the size of the U.S. economy. A tariff war between the two countries will hurt Canadians more than Americans. Even though their dollar value is roughly similar, U.S. tariffs on Canadian goods are equivalent to just 0.1 percent of the American economy, while our countermeasures are 10 times larger when measured against the size of ours.

The U.S. has already promised more tariffs, including on auto parts and critical minerals. As the ground continues to shift, Canada will have to decide where to draw that line, and whether the “elbows up” approach is working as intended—or simply hurting Canadians.

A version of this post was originally published by the Business Council of Alberta at businesscouncilab.com.