A long-term trade war with Canada could hurt Massachusetts’ economy

Jim Knott, CEO of Riverdale Mills in Northbridge, says he’s being hit twice by the current trade war with Canada.

“We’re living both sides of the picture,” he said of his stainless steel manufacturing business, which purchases thousands of tons of steel annually from Canada to produce wire mesh for lobster traps as well as fencing. “We’re paying a 50% tariff on our raw materials, and our customers are paying a 50% tariff on the product that they need to buy from us.”

Knott said 70% of the steel rods he uses comes from Canada, and steel represents two-thirds of Riverdale’s’ production costs.

In 2018, the company paid over $1 million in tariffs. In 2025, it paid close to $1.5 million in tariffs.

Knott is not the only local business leader worried about fallout from the ongoing trade war that escalated last month, with President Donald Trump announcing 50% tariffs on about $20 billion word of Canadian goods. Canada matched those 50% tariffs dollar-for-dollar, and Trump further escalated the battle by banning $1 billion worth of Canadian products as of last week.

Massachusetts business representatives and observers say the trade war could have a harmful and long-lasting impact on the Massachusetts economy.

Last week’s ban on certain Canadian imports includes alcoholic beverages, dairy products and motorcycles. But that’s just the tip of the iceberg for the state’s industries, said Brooke Thomson, president and CEO of Associated Industries of Massachusetts.

“It doesn’t matter the industry,” Thomson said. “Anybody in Massachusetts who is working in the innovation space, who is working in the advanced manufacturing space, who is trying to bring in raw materials, is seeing an impact. And that impact is being passed on to consumers.”

Associated Industries, a non-partisan business association, has more than 3,000 members from more than 150 industries representing 650,000 employees. Last month it issued a member survey that included questions about the impact of recent tariffs. Three-quarters of respondents said they’re seeing negative consequences.

Thompson said Massachusetts exports $3.1 billion in goods, plus another $3 billion in services, every year to Canada.

Exported products include chemicals, minerals, plastic, transportation and agriculture, while imports include lumber, which is huge, Thomson said.

“We know in Massachusetts we have to build more homes and we have to make them more affordable. Well, when we get the majority of our lumber from Canada, and now there’s a tariff on that, that’s adding to cost. That is just driving up that price,” she said.

‘A very small retaliatory action’

Ravi Ramamurti, professor of international business at Northeastern University, said when the U.S. is doing billions worth of trade with Canada, the latest action is a small fraction of what might affect the nation and Massachusetts.

“I see the latest salvo as a flea bite or mosquito bite,” he said. “It’s really a very small retaliatory action, considering that some of the products on the current list are already subject to a 50% tariff in the initial action.”

Ramamurti, director of NEU’s Center for Emerging Markets, said that the Canadian retaliation to the U.S. action is more consequential, because it affects something like $20 billion worth of products going from the US to Canada.

“The design of that retaliation is quite clear,” he said. “It’s meant to affect the swing states in the midterm election. Now, Massachusetts is not a swing state, but I would say it suffered some collateral damage because some of the products that may be important to some of the swing states are also going to have some impact on Massachusetts.”

For example, he cited the export of medical devices from Massachusetts, saying that while that wasn’t a specific target of the tariff, it has indirect impacts.

“Massachusetts in some ways is an innocent bystander getting affected by this battle. The most important thing we get from Canada is energy in Massachusetts, and that’s exempt from any of these tariffs. So I think we are fortunate that we are not at the front line of this war,” Ramamurti said.

Canada’s tariffs on hundreds of American imports target U.S. steel and aluminum, appliances like dishwashers and washing machines, clothing, furniture, and fish and dairy.

But Thomson said the impact of tariffs can be seen elsewhere such as with heating oil prices and even mobile phones.

“Why can’t I get the cell phone that I want?” she said. “Well, there’s not enough out there right now.”

Ramamurti said tariffs of 50% will mean that products will cost consumers more, and one example is hockey sticks, which come from Canada.

“If you want to buy a hockey stick in a sporting goods store, you probably find prices have gone up or that they’re out of stock,” he said.

The AIM survey included questions about the potential impact of the latest round of tariffs, which area of business will be most affected and how companies are preparing for them.

Thomson is encouraging businesses to share their story so that local and federal policy makers can address the real-time impacts and hopefully make adjustments.

She added that AIM’s Business Confidence Index of Massachusetts employers fell 5.2 points in one month into pessimistic territory. That 5-point drop in one month is dramatic, she said.

“When we ask the folks who are filling out the [survey] why, they specifically say it’s because of upward pressure on inflation and higher costs, and certainly tariffs are a major part of that,” Thomson said.

Tariffs make it harder to compete

Knott said Riverdale Mills has been making wire mesh for over 45 years, supporting the lobster industry in Newfoundland, New Brunswick, Quebec and Nova Scotia.

“We like to trade with the Canadians because they’re nearby, and the freight’s a fraction of what it would cost to bring it in from the Midwest or Texas or those areas,” he said.

He added that his company has faced the full weight of the 50% U.S. tariff on Canadian steel. “We’ve lost a tremendous amount of export business because of this,” he said.

And, since they export 40% of their product, the tariffs make it difficult to compete abroad.

On the other hand, Knott said the demand for his product is higher domestically than it has been in the past. “We’ve picked up a lot of domestic business which had gone to China and other areas of the world,” he said.

Ramamurti said the $880 billion total two-way trade between the U.S. and Canada is substantial, and the latest move represents only a small fraction of that.

“The initial Trump tariffs aimed at $20 billion would represent about 5% of the total trade going on between the U.S. and Canada. So it was a measured strike, probably intended to scare Canada into a more accommodative position when they’re renegotiating the U.S.-Canada trade deal,” he said.

“This is not a win-win move. It’s not even a win-lose move. It’s a lose-lose move. It’s going to be bad for Canada. It’s going to be bad for the US,” Ramamurti said.

Knott said he can’t predict the politics of the trade war, but will do what it takes to keep his plant running and his employees working.

“You have to adapt. And we adapted during the first administration, and I think we’re adapting well during this administration too,” he said.