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Trump's Canada Import Ban Deepens Trade Rift, Threatens Future of USMCA, Capital Economics Says

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President Donald Trump's Canada import ban escalates trade tensions and casts fresh doubt on the future of the USMCA trade deal, despite covering a tiny fraction of Canadian exports, according to Capital Economics in a Wednesday note.

Trump's ban, announced on Tuesday, covers only 0.25% of Canada's US-bound exports, calculated Capital Economics. Trump banned roughly $1 billion worth of Canadian products, including alcohol and cheese, effective Sept. 29.

"Trump's willingness to impose an import ban is further evidence, if it were needed, that these latest measures are about inflicting economic pain rather than raising revenue," wrote Capital Economics Chief North America Economist Stephen Brown.

The ban is unlikely to materially deepen the economic hit, but it raises the prospect of earlier tariffs lasting longer than expected, Brown said. A 50% decline in US imports of affected goods could cut Canada's gross domestic product by about 0.4%, while weaker investment and hiring could further weigh on growth.

The latest escalation further reduces the chances of a near-term USMCA deal, increasing the risk that Trump could withdraw from the trade accord altogether, according to Capital Economics.

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