The news: The US-Canada trade relationship is in trouble, making it tougher for retailers to plan in an already uncertain environment.

Talks collapsed Friday, prompting President Donald Trump to impose 50% tariffs on $20 billion of Canadian goods, ranging from hockey sticks to tongue depressors. Canadian Prime Minister Mark Carney set September 8 as the start of its retaliatory levies, per The Wall Street Journal.

Trump escalated the conflict on Monday by threatening 50% tariffs on Canadian autos, trucks, parts, and steel starting January 2027, per The Journal. Carney's government doesn’t expect a resolution before the November midterm elections and is preparing aid for domestic businesses, per Bloomberg.

Zooming out: The collapsed deal would have cut steel and aluminum tariffs to 25% from 50% and auto tariffs to 15% from 25% in exchange for Canada dropping retaliation and lifting bans on US alcohol. Premiers rejected the terms as leaving tariffs too high for Canadian businesses to remain competitive, per The Journal.

The fallout is already evident:

• The new tariffs cover about 5% of Canada’s US-bound exports but push the effective US tariff rate to 7.5% from roughly 5%, per BMO data cited by The Journal.
• 40% of Canadian exporters sell products now subject to the tariffs, and nearly 80% of those expect revenue losses, per a Canadian Federation of Independent Business survey.
• 66% of Canadians say Carney was right to walk away, even as nearly 90% worry about the economic costs to come, per an Angus Reid Institute poll.

The trade war isn’t the only source of uncertainty weighing on businesses in the US, Canada, and elsewhere. Since the start of the war in Iran, Brent crude prices have risen nearly 30% to around $93 a barrel, while ship traffic through the Strait of Hormuz has fallen from roughly 130 vessels a day to 30 last weekend, per The New York Times. With no clear resolution in sight, those disruptions are adding another layer of cost and uncertainty to an already difficult operating environment.

Implications for retailers and brands: Companies have more reasons to shorten planning cycles when trade rules and input costs can change on a dime. That makes it increasingly important to price political risk into sourcing decisions and build supply chain optionality rather than bet on any one outcome holding. But with tariffs and oil prices rising simultaneously, some higher costs will inevitably flow through to consumers, creating a significant challenge at a time when wages are already struggling to keep pace with inflation.

The larger, longer-term risk is behavioral. Buy Canadian sentiment has been building since the early days of the Trump administration, and consumers have now had 18 months to form new habits. That sentiment remains strong enough to override price for some shoppers, with 19% of Canadian adults saying they’ll buy Canadian even when it costs more, per Abacus Data, and another 43% saying they’ll prioritize Canadian products in some categories while choosing cheaper options in others. Higher prices on US spirits, food, furniture, and autos could reinforce that preference, making it harder for US brands to win those customers back even if the tariffs eventually disappear.