https://crsreports.congress.gov
Updated March 17, 2025
U.S.-Canada Trade Relations
The United States and Canada have had one of the largest
bilateral trade relationships in the world, including highly
integrated energy and automotive markets. U.S.-Canada
trade has been governed first by the 1989 U.S.-Canada Free
Trade Agreement, then by the 1994 North American Free
Trade Agreement (NAFTA), and now by the 2020 United
States-Mexico-Canada Agreement (USMCA). During his
second term, President Trump has expressed dissatisfaction
with the U.S.-Canada trade relationship and has imposed
tariffs on Canadian goods imports. Congress may consider
whether to exercise its legislative prerogatives related to the
U.S.-Canada economic relationship, such as evaluating the
potential benefits and costs of tariffs as well as U.S.
economic integration with Canada, and engaging with the
USMCA joint review process.
U.S.-Canada Trade Overview
According to U.S. Census Bureau data, Canada was the
third-largest source of U.S. goods imports in 2024 ($413
billion) and the top destination for U.S. goods exports
($349 billion). When taking into account both goods and
services trade, Canada was the second-largest U.S. trade
partner in 2024 (see Figure 1).
Figure 1. Top U.S. Trade Partners (2024)
Source: CRS, with U.S. Bureau of Economic Analysis data, March
2025.
According to Statistics Canada data for 2024, Canada
exported 76% of its goods to, and imported half of its goods
from, the United States. As of 2023 (the latest data
available from the U.S. Bureau of Economic Analysis and
Statistics Canada), the United States was the largest source
of foreign direct investment (FDI) by stock in Canada
(C$618.2 billion/about $455 billion), and Canada was the
third-largest source of U.S. FDI ($671.7 billion). Canada
has been the largest supplier of U.S. energy imports—
including crude oil, natural gas, and electricity. Canada’s
share of U.S. crude oil imports by quantity increased from
38% (1.02 billion barrels) in 2014 to 63% (1.48 billion
barrels) in 2024 (see Figure 2).
U.S. Tariffs on Canadian Imports
In February, President Trump announced he would impose
25% tariffs on Canadian imports (10% on energy imports)
under the International Emergency Economic Powers Act
(IEEPA, 50 U.S.C. §§1701 et seq.). The tariffs went into
effect on March 4, and as of March 7, the tariffs are
suspended for Canadian goods entering the United States
under USMCA. According to 2024 U.S. Census Bureau
data, about 38% of Canadian goods by value entered the
United States under USMCA.
Canada responded with 25% tariffs on C$30 billion
(approximately $22 billion) worth of U.S. imports. Canada
is planning to impose tariffs on an additional C$125 billion
(approximately $92 billion) worth of U.S. imports.
Canadian Prime Minister Mark Carney has stated that the
retaliatory tariffs will remain in place until the United
States shows “respect” and makes “credible, reliable
commitments to free and fair trade.” The Canadian federal
government is also conferring with provincial and territorial
governments on potential non-tariff measures (e.g., related
to critical minerals and energy). Provinces and territories
have announced retaliation measures related to the sale of
U.S. alcohol and government procurement.
On March 12, President Trump eliminated all country
exemptions from 25% steel and aluminum tariffs under
Section 232 of the Trade Expansion Act of 1962 (19 U.S.C.
§1862, as amended), including for Canada. On March 13,
Canada imposed retaliatory tariffs of 25% on C$29.8 billion
(about $22 billion) worth of U.S. imports. Canada has
challenged the Section 232 and IEEPA tariffs at the World
Trade Organization (WTO).
Figure 2. U.S. Crude Oil Imports 2014-2024
Source: CRS, with U.S. Census Bureau data, as presented by Trade
Data Monitor, accessed February 2025.
President Trump has stated that he is also considering
imposing “reciprocal tariffs” in April 2025 on all trading
partners, which would take into account non-tariff barriers
and foreign taxes, as well as potential tariffs on the
automotive sector, lumber, and Canadian dairy products.
Congress may instruct the Trump Administration and/or the
U.S. International Trade Commission (USITC) to assess the
economic impacts of U.S. tariffs and Canadian retaliatory
measures. Congress may also consider whether to conduct
oversight over U.S.-Canada trade relations, including the
scheduled 2026 USMCA joint review.
Other Selected Trade Issues
In addition to recent tariff actions, current and potential
areas of discussion on trade between U.S. and Canadian
officials include Canadian legislation regarding digital
