Trump’s Tariff Tussle Tangles Montana

It started last Saturday, when President Donald Trump announced he was “taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.” By Monday morning, Trump had ordered 25-percent tariffs on Canada and Mexico, along with a 10-percent tariff on China, affecting about $1 trillion in trade goods destined for the United States.

On Sunday, Canadian Prime Minister Justin Trudeau warned that Canadians were ready to retaliate with particular emphasis on red states such as Montana, which voted for Trump by 58 percent. Canadian liquor stores pulled American whiskey and wine off their shelves. Canadian sports fans booed the U.S. national anthem before NBA games.

But more importantly, Trudeau proposed retaliatory tariffs on Canadian goods coming south. Importers on each side of the border would pay those costs, and typically pass the expense on to their own customers in the form of higher prices.

Trump’s tariffs were hours old on Monday when the Council on Foreign Relations opened a press webinar examining the U.S.-Canada trade war. Its experts were just touching on possible impacts to Montana when a reporter called in: Trudeau had just folded his hand. Trump declared victory and offered a 30-day deferment while new details were worked out.

The tariffs meant potential price hikes on $441 million in Canadian agricultural goods imported to Montana. A big portion of the 205,000 barrels of crude oil refined daily in Billings, Laurel and Great Falls comes from Alberta. Trump ordered 10-percent tariffs on energy imports, which could go straight into Montana power bills.

“They do buy enough U.S. goods and we buy enough Canadian goods that retaliatory tariffs are a big deal,” said Derek Sheehan at the University of Montana’s Bureau of Business and Economic Research. “Montanans sell a lot of lentils, barley, wheat and hay to Canadians. That will impact those farmers. Most trade doesn’t move quickly. These are long-term relationships. So in the short term it can be pretty devastating.”

In 2023, Montana exported $321 million worth of commodities to Canada. That was the state’s top foreign market, absorbing 77 percent of its agriculture and agri-food exports. Mexico is Montana’s next biggest trade partner, but only gets 4 percent of that pie.

Those Canadian exports included $113 million in live cattle, $106 million in dried legumes, $25 million in brewing and distilling dregs, $10.2 million in barley and $10.1 million in cigarettes.

Heading south, Canadians sent the U.S. $222 million worth of canola oil, $55 million in barley, $26 million in dried legumes, $14 million in mustard seed, and $13 million in wheat and meslin.

But the numbers can be misleading. For example, brewing and distilling dregs are the leftovers from making beer and spirits, which are then sold as animal feed. While Montana has a thriving home-brewed bar scene, it’s not all that big, according to Ryan Montgomery of Montgomery Distillery in Missoula.

“I wish we could sell it for $25 million, but right now everybody I know is giving it away for free,” Montgomery said. “I don’t know of any place in Montana that has a big enough operation to dry it and pelletize it for animal feed. So if that’s going through a port in Montana, it’s not coming through Montana distillers and brewers. A lot of that comes from ethanol plants in the Midwest.”

Much of that combined $65.1 million in barley going north and south winds up in beer. The North American beer industry gets most of its malt from farms along the Rocky Mountain Front between Bozeman and Calgary. But while the Malteurop malting plant in Great Falls is the largest in North America, most of that is passing through Montana on the way to bigger Anheuser-Busch breweries on either side of the border.

Other numbers are equally lacking context. Trump’s stated objective of pressuring Canada to lower fentanyl smuggling and illegal immigration was his justification for using a law called the International Emergency Economic Powers Act, according to Inu Manak, trade policy expert at the Council on Foreign Relations. But Canadian border incidents make up 0.2 percent of the fentanyl seized by U.S. law enforcement, and 1.5 percent of U.S. Border Patrol migrant encounters.

Wood has a whole trade war of its own, which has been going on for 40 years, much longer than Trump has been a politician. In 2024 alone, the U.S. Commerce Department bumped duties on Canadian lumber from 8.05 percent to 14.54 percent. The department was expected to increase that to 30 percent later in 2025, independent of Trump’s 25-percent tariff threat from Sunday.

That reflects the volatility of wood prices. Canadian lumber has dropped 70 percent since its 2021 pandemic peak from approximately $1,000 per thousand board-feet of lumber to about $300 (it’s now trading at about $430 per thousand board-feet). Last year, Canada exported nearly $3 billion in lumber to the United States. However, Canadian firms also control about 22 percent of the U.S. sawmill capacity, mainly by owning facilities in the Southeast.

“Trump said we don’t need Canadian lumber, but we certainly do,” Manak said. “This is the worst possible time for the housing market.”

The U.S. building industry also requires Canadian steel and aluminum, Manak noted. With home mortgage rates still above 7 percent and zoning reform efforts stalling nationwide, she said, “raising the costs of construction on new houses just exacerbates the problem.”

By Monday afternoon, both Trudeau and Mexican President Claudia Sheinbaum announced they had worked out 30-day reprieves from Trump’s tariff orders. Sheinbaum said she’d ordered 10,000 Mexican troops to the U.S. southern border, and received assurances Trump would prevent weapons trafficking into her country. Trudeau said he was implementing a $1.3-billion border enforcement plan along with a new “fentanyl czar” and $200 million for drug and organized crime prevention.

However, Mexico has routinely moved thousands of troops to the border during both the Biden and previous Trump administrations. And the Canadian border plan was first announced on December 1, 2024. As a Washington Post analysis put it, “that means the actually new things that came after Trump’s threat, apparently, are the fentanyl czar, labeling cartels terrorists, the $200 million and 24/7 eyes on the border.”

CFR Director of International Economics Benn Steil added that Trump’s growing use of national security as a reason for tariff action is having a global effect. Launching a trade dispute on a national security basis instead of an economic one is a way for Trump to avoid World Trade Organization challenges, Steil said. Trump has also left vacant several U.S. WTO judge seats, preventing its dispute settlement body from reaching a quorum.

That has two impacts, according to Steil. One is that other nations are shifting their trade disputes to national security claims, copying Trump’s strategy of nullifying the WTO as an effective international referee.

The second, Steil said, was the opening the move offers to China. One of China’s top responses to its own Trump tariff challenge has been to invite other trading partners to abandon the U.S. for its more welcoming market.

“It’s showing the U.S. is moving away from multilateralism,” he said, “while China is still engaged.”

Montana farmers and ranchers endured a similar China trade tariff war during Trump’s first administration. The United States took in about $66 billion between 2018 and 2020 in agricultural tariffs. But they caused so much in-country outrage, Steil said, Trump returned about $61 billion of that to compensate for losses from Chinese retaliation.