Winnipeg Manufacturer Calls Ottawa’s Retaliatory Tariffs ‘Friendly Fire’ as Canada-U.S. Fight Hits Businesses

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A trade war is usually described as a battle between countries. For some Canadian manufacturers, however, the most painful hit can arrive before their products even cross the border. Winnipeg-based Evolution Wheel owner Derek Hird has described Ottawa’s retaliatory tariffs as “friendly fire,” arguing that duties on specialized U.S. steel are increasing the cost of making Canadian products at home.

His experience captures a difficult problem facing Ottawa as the Canada-U.S. dispute intensifies. Canada wants enough tariff pressure to answer Washington and defend domestic industries, yet many Canadian factories remain tightly connected to American suppliers. With another round of Canadian counter-tariffs approaching, the challenge is increasingly about more than matching U.S. measures dollar for dollar. It is also about preventing Canadian companies from becoming unintended casualties of the response.

Why Evolution Wheel Says the Tariffs Are Hitting the Wrong Target

Evolution Wheel manufactures solid, airless tires in Winnipeg for equipment used in industries such as construction and agriculture. The company needs high-strength steel that Hird says is difficult to source in Canada, so it brings the material in from the United States. Those steel imports are currently subject to Canada’s 25% retaliatory tariff. Hird has applied for relief, telling CBC that he had not yet received an answer on whether the company qualifies. That creates an unusual situation: a Canadian manufacturer is paying Canada’s tariff in order to obtain a material it says it needs to keep manufacturing in Canada.

The exposure does not end at the factory door. Hird says roughly 85% to 90% of Evolution Wheel’s finished production is sold into the United States. Earlier accounts from the company have also described a supply chain heavily dependent on U.S. materials. In practical terms, the business can be caught between Canadian tariffs on what it buys and American trade measures affecting what it sells. Hird has even said the company has considered moving operations south of the border if conditions deteriorate. That possibility explains why his “friendly fire” description carries more weight than a simple complaint about higher costs: the dispute is beginning to influence where production and jobs could ultimately be located.

A Tariff on an Input Can Become a Tax on Canadian Production

Retaliatory tariffs are designed partly to create political and commercial pressure on the country imposing the original duties. The complication is that an imported product is not always a finished consumer good. Steel, aluminum, machinery, components and specialized materials frequently become inputs for something manufactured in Canada. When no practical domestic substitute exists, the Canadian importer may have little choice but to pay the tariff, absorb it through lower margins, raise prices or change its supply chain. Evolution Wheel illustrates that problem particularly clearly because the company says its imported steel is incorporated into products manufactured by Canadian workers in Winnipeg.

Canadian business data show that these cost pressures are already spreading beyond individual factories. Statistics Canada reported that 28.3% of businesses surveyed in the second quarter of 2026 had passed tariff-related cost increases to customers during the previous 12 months. Another 33.8% said they were somewhat or very likely to do so during the coming year. Economic research also shows why policymakers pay close attention to imported inputs. A Federal Reserve study of the 2018–19 U.S. tariff period found that higher input costs and foreign retaliation offset some of the protection tariffs provided manufacturers, while producer prices increased in industries more exposed to imported-input tariffs. Canada’s circumstances are different, but the underlying supply-chain mechanism is much the same.

Ottawa Has a Relief Process — but Timing and Eligibility Matter

The federal government has recognized that tariffs can unintentionally hurt Canadian companies. Its remission framework allows businesses to request relief when needed inputs cannot be sourced domestically, either nationally or regionally, or reasonably obtained from suppliers outside the United States. Ottawa can also consider exceptional cases where tariffs could cause severe economic harm. Separate programs can sometimes allow duties to be avoided or refunded when imported goods are ultimately incorporated into exports. On paper, those mechanisms are designed for precisely the sort of supply-chain complications that arise when retaliation collides with integrated North American manufacturing.

The difficulty is that relief is not universal. Canada previously provided broader temporary remission for U.S. steel used in manufacturing and processing, but that general steel relief expired at the end of January 2026. The steel relief extended this year is narrower, covering areas including auto and aerospace manufacturing and certain health, safety and national-security uses. Other companies may have to pursue case-specific remission. Hird says Evolution Wheel has done so because of the difficulty of sourcing its particular high-strength steel domestically. For a manufacturer making purchasing decisions continuously, however, a relief program is most valuable when eligibility can be determined quickly. An eventual refund may help financially, but uncertainty in the meantime can still affect pricing, inventory, contracts and investment.

Canada’s Next Retaliatory Round Raises the Stakes

The pressure is about to become broader. Prime Minister Mark Carney said on August 21 that new U.S. tariffs of 50% would cover roughly $28 billion worth of Canadian goods and that Canada would respond dollar for dollar. A day later, he said the counter-tariffs would take effect on the Tuesday after Labour Day — September 8, 2026. Ottawa has indicated that its response will concentrate on sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. As of August 24, the government had not yet released the complete product-level details, making it important not to assume every American input in those categories will ultimately face identical treatment.

Carney has also acknowledged the trade-off directly: counter-tariffs can raise Canadian costs and reduce consumer choice even when Ottawa believes retaliation is necessary. That tension is especially important for intermediate goods. A duty on an American appliance competing with a Canadian-made appliance operates differently from a duty on a specialized material that a Canadian factory needs to produce something else. For manufacturers like Evolution Wheel, the fine print — exemptions, tariff classifications, remission eligibility and implementation dates — can matter almost as much as the headline tariff rate. The more precisely retaliation distinguishes replaceable imports from difficult-to-replace production inputs, the lower the risk that Canadian companies bear part of Ottawa’s intended pressure on Washington.

Manitoba Is Particularly Exposed to a Border Disruption

Evolution Wheel is only one business in a province built around deep north-south trade. Manitoba’s 2025 budget estimated annual bilateral trade with the United States at about $39 billion. In 2024, Manitoba exported approximately $14.5 billion in goods to the U.S., more than 70% of its international merchandise exports, while importing about $23 billion in American goods. Major exports include buses, farm machinery, pharmaceuticals, electricity, potatoes and processed agricultural products. Major imports include aerospace components, tractors, vehicles, fertilizer and industrial equipment. Those figures help explain why tariff changes can quickly move from a political dispute in Ottawa and Washington into factory schedules, farm operations and purchasing decisions across the province.

The concern became concrete again on August 24 when Premier Wab Kinew reconvened Manitoba’s U.S. Trade Council to discuss impacts on employers, workers, exporters and supply chains. The council brings together business, labour, industry and Indigenous representatives. Manitoba’s honey industry offers another example of the exposure. Producers interviewed by CBC described the new U.S. tariff environment arriving during harvest and threatening established American sales just as fresh product was coming to market. Whether the business is making industrial tires in Winnipeg or selling agricultural products from rural Manitoba, the common problem is dependence on commercial relationships that developed during decades of increasingly integrated continental trade.

Small Exporters Have Less Room to Absorb a 50% Shock

Large corporations can sometimes spread trade-war costs across multiple factories, markets and product lines. Smaller exporters generally have fewer options. An August Canadian Federation of Independent Business study gathered responses from 1,833 CFIB member business owners. Among exporters surveyed, 40% said they sold products affected by the proposed 50% U.S. tariff measures. Of those exposed exporters, 77% expected revenue losses and 35% expected revenue to fall by at least half. Machinery and equipment, wood and building products, plastics and packaging, food products, and creative goods were among the categories CFIB identified as particularly vulnerable.

Those numbers do not mean every affected company will experience the forecast decline; they record what surveyed owners expected as the tariffs approached. They nevertheless illustrate why a seemingly simple instruction to “find another market” can be difficult in practice. A small manufacturer may have spent years obtaining certifications, building dealer relationships, arranging logistics and designing products around American customers. Moving that business to Europe, Asia or another Canadian province requires time and money. Likewise, replacing a U.S. supplier may require new tooling or quality testing. For a company already operating on thin margins, absorbing a tariff while waiting for new customers or government relief can become a cash-flow problem long before a long-term diversification strategy produces results.

Canada Is Diversifying, but the U.S. Relationship Cannot Be Replaced Overnight

There is evidence that Canadian trade is already shifting. Statistics Canada reported that merchandise exports to the United States fell 5.8% in 2025, while exports to countries outside the U.S. increased 17.2%. The American share of Canadian merchandise exports declined from 75.9% in 2024 to 71.7% in 2025. That is a meaningful change in a single year and supports Ottawa’s argument that Canadian businesses can build more markets abroad. Federal programs are also trying to accelerate the adjustment, including a $1-billion Business Development Bank of Canada program for tariff-exposed metal-related companies and expanded regional funding intended to help firms improve productivity and diversify.

Yet the scale of the existing relationship remains difficult to replicate. Canada-U.S. goods trade exceeded $1 trillion in 2024 for the third consecutive year, and sectors such as manufacturing remain closely integrated across the border. That is why the Evolution Wheel case matters beyond one Winnipeg company. Ottawa faces two objectives that can sometimes pull in opposite directions: showing Washington that tariffs will bring a Canadian response while preserving the competitiveness of Canadian businesses that still depend on American materials and customers. If retaliatory measures push an otherwise viable manufacturer to reduce production, cancel investment or relocate south, the economic pressure has landed partly on Canada itself. The effectiveness of the next phase will therefore depend not only on how forcefully Ottawa retaliates, but on how quickly it can identify and protect Canadian companies caught in the crossfire.

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