For all of U.S. President Donald Trump‘s bluster that the U.S. doesn’t “need anything” from Canada, the reality is America is dependent on Canadian shipments of critical materials, from potash to aluminum, supply chain experts say.
It’s unlikely American companies will find suppliers to replace the Canadian manufacturers of these goods any time soon, analysts continue — meaning many U.S. importers will be forced to pay extra for the same supplies, a result of Trump’s 25 per cent tariffs on all Canadian products (and 10 per cent duties on Canadian oil and gas).
“All these things will end up driving up costs for producers in the U.S., manufacturers, farmers — and ultimately hit the pocketbooks of U.S. consumers,” explained Fraser Johnson, the Leenders Supply Chain Management Association Chair at Western University’s Ivey Business School.
We asked experts to break down each of the critical materials the U.S. is reliant on Canada for. Here’s what you should know.
Potash
Potash, a collection of potassium-rich minerals and chemicals, is the “lifeblood of the agricultural industry in the United States,” according to John Boscariol, head of the international trade and law group at McCarthy Tétrault.
The resource is a key component in approximately 95 per cent of fertilizers, and is used in the manufacturing of items from pharmaceuticals to ceramics.
Canada is the world’s largest producer and exporter of potash, and holds the world’s largest potash reserves — approximately 1.1 billion tonnes, according to Natural Resources Canada.
In comparison, the U.S. produces very little potash domestically, and imports more than 80 per cent of its supplies from Canada. This is largely due to the geographic proximity of Canada and the quality of Canadian potash, Johnson explained.
“It’s much easier, much less expensive to get potash from a North American supplier than it is to have it shipped halfway around the world” from other large producers, namely Russia and Belarus, he said — not to mention the current American sanctions on the two countries following Russia’s invasion of Ukraine.
As a result, American farmers are forced to either pay more for Canadian potash or risk a less productive harvest. In turn, this is expected to drive up grocery prices for American-made agricultural goods and food products in the near future, noted Jim Kilpatrick, Deloitte Canada’s leader for global supply chain and network operations.
At what point consumers will feel the pain depends on how much potash U.S. farmers have already secured, and how much remains to be moved across the border. It’s possible the direct impact could be delayed by one growing season, Kilpatrick predicted.
U.S. farming groups and politicians of all stripes have called for potash exemptions from Trump’s blanket tariffs. It remains to be seen whether this specific sector will be spared from the duties.
Critical minerals
Canada is also a top supplier of critical minerals to the U.S., including nickel, aluminum, steel, copper and uranium. In 2023, Canada made up $46.97 billion in U.S. metal and mineral imports, followed by China at $28.32 billion.
These materials are critical in American manufacturing, from the automotive industries to the military and defence sectors. The issue is, according to Boscariol, the minerals used in these sectors must meet stringent certification requirements — and these can often take years to establish and meet.
“These supply chains that have been developing over decades and have been certifying certain types of metal, whether we’re talking about aluminum or nickel, can’t just switch sources overnight,” he said. “We’re talking about materials that are being used in vehicles, in civilian and military aircraft. Safety is a real issue.”
The U.S. currently does not have the domestic manufacturing capabilities to meet their mineral needs, Johnson added — “They have been actually shrinking their aluminum refining capacity. They need Canadian aluminum… So in terms of the impact on Canadian companies, the aluminum producers at least are in pretty good shape.”
As with potash, it will be American consumers left holding the bill, Kilpatrick said, forecasting price increases in a vast array of consumer goods, technology, automobiles and industrial products that incorporate minerals like aluminum in different ways.
This will only be made worse when additional 25 per cent tariffs on all steel and aluminum imports kick in on March 12 — amounting to a cumulative 50 per cent tariff on Canadian aluminum and steel. Canada exported 6.56 million tons of steel to the U.S. last year and accounted for 56 per cent of aluminum imports in 2023, according to the Residential Construction Council of Ontario.
Prime Minister Justin Trudeau has suggested Trump is “very aware” of Canada’s resources, and told a hot mic in February these critical minerals are partly fuelling his desire to annex Canada.
On the eve of the trade war, Ontario Premier Doug Ford also threatened to shut down Ontario’s nickel imports into the U.S. For context, the U.S. mined 17,000 tonnes of nickel in 2023, while Canada mined 180,000 tonnes, according to the United States Geological Survey.
Energy and crude oil
According to Kilpatrick, “When you look at the the exports from Canada into the U.S., by far and away the number one export category… are energy products — most of which is oil, but not exclusively.”
In 2023, 97 per cent of all of Canada’s crude oil exports went to the U.S., according to Canada Energy Regulator, the majority of which was produced by Alberta. This amounted to 60 per cent of all of the U.S.‘s crude oil imports as of 2022, as well as 52 per cent of its total petroleum imports, data from the U.S. Energy Information Administration suggests.
“We do import some oil and gas from the U.S. as well, but that contributes to the vast majority of the so-called trade imbalance with the U.S.,” Kilpatrick explained.
Unfortunately, Canada’s crude oil exports require “specific investments at the refinery to be able to process it,” he continued, “which is partly why our Canadian oil sells at a discount… we don’t have a lot of easy options for other places to take our oil.”
On the other hand, because American importers are buying our oil at a discount already, they may choose to absorb some of the 10 per cent tariffs on Canadian energy themselves. But Kilpatrick could also see Canadian suppliers lowering their prices, and therefore profits, to compensate for some of the duties.
Johnson explained the U.S. is so dependent on Canadian oil because of the existing infrastructure that makes transportation faster and cheaper than the alternatives. For one, there are 117,000 kilometres-worth of pipelines ferrying Canadian oil products into the U.S. built up over decades, according to the Canadian Energy Centre.
“If they’re looking for alternative sources of supply, you’re probably looking at shipping it in by tankers and putting it into railcars, which are very expensive,” Johnson explained. American oil refineries have also been geared specifically toward refining Canadian crude oil after decades of reliable trade, he said.
These factors, coupled with the relative affordability of Canadian oil, means American companies are likely to continue buying Canadian — and pass on the tariff price increases to consumers at the pumps, Johnson said.
“All the estimates I’m seeing is between a 40 and 50 cent a gallon increase in the price of gas” for American consumers, he said.
Automotive parts
The automotive industry is “arguably one of the most integrated industries in North America,” said Boscariol.
Over 60 years of North American free trade, vehicle manufacturers in Canada, the U.S. and Mexico have become thoroughly integrated, with components manufactured in all three countries crossing their borders dozens of times before a vehicle is assembled, he explained.
“Producers have shaved their margins as low as they can,” Boscariol said. “There’s no room to introduce a single 25 per cent tariff, let alone it hitting multiple times when the parts and components move back and forth between that border.”
Stacking onto these costs are the potentially 50 per cent tariffs on Canadian steel and aluminum, Kilpatrick added. “The challenge with the automotive industry is if a car has 4,000 plus parts in it, all it takes is one missing part to not be able to produce the automobile,” he said. “It doesn’t take much to upset production.”
On Wednesday, Trump announced a one-month exemption on tariffs for the auto sector — although it was unclear whether they will also be exempt on the blanket 25 per cent tariffs on steel and aluminum.
Should the tariffs set in, auto assembly plants and parts manufacturers across North America will likely shut down within a week, said Flavio Volpe, the head of the Automotive Parts Manufacturers’ Association.
The end result is lost jobs on both sides of the border and a price increase in North American vehicles across the board, the experts said.
Lumber
Canada is the top supplier of wood products to the U.S., making up $11.5 billion U.S. in 2023, according to the Observatory of Economic Complexity — dwarfing the second greatest contributor, China, with $2.39 billion (U.S.) in imports.
The States are also Canada’s biggest customer for lumber, according to Natural Resources Canada.
The U.S. produces its own lumber domestically, “but not enough of it to deal with housing, construction and so on,” said Greg Anderson, a professor of political science specialized in North American integration at the University of Alberta.
Logging in the U.S. Pacific Northwest has slowed ever since the Endangered Species Act was introduced in 1973, Anderson explained. And while there has been some growth in the sector in the southeastern U.S., “it’s not nearly enough” to compensate for its needs.
“One of the ironies of all these tariffs is that… many of the Canadian lumber producers are subsidiaries of the big American firms” like Weyerhaeuser, Anderson continued.
Tariffs on Canadian lumber have been a subject of debate between the two countries for decades, he said. “Every time there’s there’s an uptick in that dispute, home prices and lumber costs go through the roof. Construction prices go up,” Anderson explained. A similar crisis is expected to happen here.
