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Canada is more than Vermont’s largest international trading partner. It is our neighbor, ally, and an essential part of our state’s economy, communities, and shared future.

The Vermont Chamber of Commerce is deeply concerned by the escalation of the trade dispute between the United States and Canada. New 50% tariffs on approximately $20 billion in Canadian goods took effect on August 22 following the suspension of trade negotiations between the United States and Canada. Canada has announced that it will match the new tariffs dollar-for-dollar.

The United States has described the tariffs as a response to Canadian trade practices affecting American products in several sectors. Canada has said the negotiations had made significant progress but that last-minute changes to the proposed U.S. terms prevented an agreement.

Regardless of the competing concerns at the negotiating table, escalating tariffs are the wrong outcome for Vermont businesses. Tariffs are collected from U.S. businesses importing covered products and function as taxes on those businesses. The costs can then flow through supply chains, raising prices for families, farmers, and employers on both sides of the border.

A Vital Relationship for Vermont

Vermont’s relationship with Canada is economic, geographic, and personal.

Canada is the state’s largest international trading partner, accounting for more than $600 million in Vermont exports and more than $2 billion in imports in 2024. Vermont businesses rely on Canadian suppliers, customers, visitors, and transportation networks. In some industries, materials and products cross the border multiple times before reaching the final customer.

Canadian visitors also support Vermont lodging properties, restaurants, retailers, attractions, and recreation businesses. Border communities and tourism destinations throughout the state have built relationships with Canadian visitors, businesses, and communities over generations.

This is not a distant international trade issue. It directly affects whether Vermont businesses can manage costs, reach customers, maintain supply chains, and plan for future investment.

An Interconnected Economy

The United States and Canada share one of the most interconnected economic relationships in the world. Supply chains, energy markets, transportation systems, tourism, and consumer markets extend across the border, supporting businesses and workers in both countries.

According to the Canadian government:

• Canada supplies 99% of U.S. natural gas imports, 85% of electricity imports, and 60% of crude oil imports.
• Canada is the largest customer for 26 U.S. states and one of the three largest customers for 45 states.
• Americans sold approximately $436 billion in goods and services to Canadian customers last year, representing nearly $1.2 billion in trade each day.

The energy percentages refer to the share of U.S. imports supplied by Canada, not Canada’s share of total U.S. energy consumption. Energy products are also excluded from this particular round of tariffs. The figures nevertheless demonstrate how closely the two economies are connected and why disrupting that relationship can create consequences well beyond the products directly covered by a tariff.

Higher Costs and Greater Uncertainty

Tariffs are paid by the U.S. companies importing covered products. Those businesses must decide whether to absorb the additional cost, pass it along to customers, renegotiate contracts, change suppliers, or delay investments.

For smaller businesses operating with limited margins and purchasing power, a sudden 50% tariff can be particularly difficult to manage. Even businesses that do not import directly may face higher costs when their distributors, contractors, or domestic suppliers depend on Canadian materials or products. 

The potential effects extend across Vermont’s economy.

Manufacturers may face higher costs for components and materials or encounter new barriers when selling into Canada. Construction companies and developers may see additional pressure on the cost of materials at a time when Vermont is working to make housing more affordable and accelerate development.

Food and beverage producers, farmers, forest products businesses, retailers, transportation providers, and outdoor recreation companies may also be affected by changing prices and trade flows.

The uncertainty surrounding the trade relationship creates an additional challenge. When tariff rates, effective dates, exemptions, and retaliatory measures change quickly, businesses have less confidence when setting prices, negotiating contracts, purchasing inventory, or evaluating future investments.

Retaliation Compounds the Impact

Canada’s decision to match the new tariffs dollar-for-dollar creates additional risks for Vermont businesses that export products into Canada. Retaliatory tariffs can make Vermont goods more expensive for Canadian customers, reduce market access, and create additional costs and uncertainty for businesses and workers on both sides of the border.

The strain can also affect tourism. Canadian visitors have long been an important part of Vermont’s visitor economy. Continued trade tension can influence travel decisions and consumer sentiment, creating consequences for lodging properties, restaurants, retailers, attractions, and communities across the state.

Escalating tariffs and retaliation risk weakening both economies by increasing costs, reducing predictability, and making it more difficult for businesses in both countries to invest and grow.

Regional Relationships Remain Essential

At the 47th Annual Conference of New England Governors and Eastern Canadian Premiers, regional leaders reaffirmed the importance of strong cross-border relationships and more resilient regional supply chains.

Those relationships matter now more than ever. Vermont and eastern Canada share an economy and sense of community built over generations. Businesses, governments, and regional partners must continue communicating and collaborating even as federal trade policies create new challenges.

The Path Forward

The Vermont Chamber supports fair and open trade that strengthens businesses, workers, and communities on both sides of the border. Vermont’s relationship with Canada is too important to allow continued escalation to undermine decades of economic and community partnership.

The Vermont Chamber will continue working with regional partners, monitoring trade developments, and gathering information from Vermont businesses. Direct employer experience will be critical to demonstrating how tariffs and retaliatory measures affect costs, investment, employment, tourism, and competitiveness across the state.

Businesses experiencing tariff related impacts are encouraged to contact the Vermont Chamber’s advocacy team at govaffairs@vtchamber.com.