Arizona businesses that rely on Canadian lumber, aluminum and other imports could soon face major cost increases if the United States and Canada fail to reach a trade agreement before a 50% tariff takes effect Aug. 19.
In February, the U.S. Supreme Court ruled 6-3 to strike down tariffs President Donald Trump had enacted under the International Emergency Economic Powers Act. The president then took a different tack, citing a section of the Tariff Act of 1930, which allows tariffs up to 50% on countries that discriminate against U.S. commerce.
Canada and the United States have been locked in negotiations over the looming tariffs.
Arizona's deep ties to Canada
Before Taiwanese investment boomed in Arizona, Canada was one of the biggest foreign players in the state. It still has
an important relationship with the country ― there are roughly 500 Canadian companies in the state, according to Glenn Williamson, founder and CEO of the Canada Arizona Business Council.
A longtime Arizona resident and Canadian by birth, Williamson founded the council in the early 2000s. He helped bring Edmonton company EPCOR to Arizona, where it spent billions buying water companies.
But at the time of the council’s founding, Canada’s presence in Arizona was understated.
“They walk like us, they talk like us, they’re among us,” Williamson said. “The Canadians were very quiet about it, and they went about their business.”
Currently, trade between Arizona and Canada is estimated at around $5.8 billion. Every year, the state imports roughly $2.8 billion in goods from its northern neighbor. Both imports and exports between the countries have increased significantly between 2020 and 2025, according to the Arizona Commerce Authority. Canada buys Arizona fruits and vegetables, Arizona buys Canadian aerospace parts.
Earlier this year, the Canadian government opened a consulate in Phoenix, cementing the partnership.
Last year’s tariffs were painful, but ultimately small enough to pass on to the consumer, Williamson said. The threat of 50% tariffs “nobody ever, ever, ever in their wildest dreams anticipated" and may require larger-scale business changes.
Some of those changes may benefit the United States, Williamson said. While some Canadian companies may plan to sell to Europe or Asia instead, others are deciding to set up shop in the United States to avoid a prolonged trade war. He expects to see increased investment in Arizona and other states as a result.
“If your barriers are high enough or in place for long enough, you can’t just ignore your largest market,” Williamson said.
Businesses brace for higher costs
Businesspeople in Arizona in mining, construction and aerospace are nervous about increasing costs and the availability of supplies. Canada is a major exporter of softwood lumber, which is critical in homebuilding, and aluminum, which has aerospace applications.
Arizona Technology Council President and Chief Executive Officer Steven Zylstra wrote in a statement that the state's manufacturing and tech companies "don't operate in isolation" and could be impacted by increasing costs on parts and raw materials.
“Tariffs imposed on Canadian products can ripple through North American supply chains and ultimately increase costs for Arizona manufacturers and their customers,” Zylstra wrote in a statement provided to The Arizona Republic.
Williamson said it may be difficult for Canadian businesses to immediately find a new customer base. Similarly, he said the U.S. may not be able to immediately prop up sufficient domestic supplies for some products.
"If you don't have a proper transition period that is handled correctly, the consumer is going to get hurt pretty badly," Williamson said.
Besides materials, part-time residents and tourists from Canada have their own economic impact in the state.
Tourism from Canada has already taken a hit in Arizona, Williamson said. He estimated that between 15% and 20% of the volume has been lost, although he believes it's stabilizing. Snowbirds and business-class travel have been less affected by the animosity between the two countries, he said.
Canada's response to the tariffs, if enacted, is still up in the air, Williamson said. But the battle over tariffs is already causing uncertainty on both sides of the border.
“Can you imagine being a medium-sized company in Canada caught up in this, and you have the staying power for six months or a year, and you got hit with a 50% tax, tariff? What do you do?” Williamson said. “It’s a tough, tough thing.”
Alaina Mencinger covers tech, energy and utilities for the Arizona Republic. Reach her at Alaina.Mencinger@usatodayco.com.
This article originally appeared on Arizona Republic: Arizona businesses warn of higher costs if Canada tariffs hit
