If Canada becomes an affiliate member of the European Union, this could deepen problems for US companies already hurt by the US-Canada trade war.
Let me show you how.
Consider these two comparable products. On the left, we see a pair of jeans from 3sixteen (a US company and one of my favorite denim brands). These jeans are cut and sewn in San Francisco using Japanese denim, and they retail for about $270.
On the right, we see a pair of jeans from Nudie, a Swedish company. These are also made from Japanese denim, but they were cut and sewn in Italy. Retail price is $280.
At the moment, US tariffs on Canadian imports have caused Canada to do the same in retaliation. Additionally, Donald Trump and members of his administration, such as Pete Hegseth, feel the need to constantly insult Canadians for some reason. This political fallout has caused two things. First, it has raised the cost of bringing US-made products into Canada. Second, it has caused Canadians to boycott US-made goods.
Andrew Chen, co-founder of 3sixteen, tells me that he's seen his long-time Canadian retail partners cut back on orders. Not only are their margins tighter, but customers are coming into the stores and explicitly saying they won't buy US-made products. Plus, Chen says his own margins are tighter, as he now has to pay more to bring in Japanese denim.
If the coming EU-Canada deal further reduces trade barriers for European goods, Canadian retailers may find it easier and cheaper to bring Nudie's Italian-made jeans into their stores — and their customers will be more receptive to buying them. This, in turn, could mean that European companies will take market share that previously belonged to Americans. Fewer orders means less production, which in translates to fewer jobs.
This story isn't just about expensive jeans. The same logic applies to US spirits, furniture, and cosmetics — all products that have found meaningful markets in Canada. This switch could have long-lasting ramifications, as consumer habits end to be sticky. Once someone switches away from US goods and towards European ones, they may be reluctant to go back, even if national relations have been repaired.
Of course, Americans could pick up the shortfall by purchasing US-made products. But I personally don't see that happening. If US consumers buy US-made jeans, they are more likely to buy the downmarket $60-$100 ones, rather than the premium $270+ ones. That means shifting the industry downstream, where wage growth is lower and production is even more likely to be automated.