New Brunswick estimates the August 19 tariffs will touch just 0.8 per cent of its exports to the United States. An economist and a small business group warn that the aggregate number conceals what happens to the mill towns and family firms where that 0.8 per cent is concentrated.
By Peacock Tariff Consulting, Canada Trade Desk
FREDERICTON, July 29, 2026 – The Government of New Brunswick released a figure this week that reads like reassurance and functions as a warning. Asked to quantify the province’s exposure to the 50 per cent American tariffs taking effect on August 19, the Finance and Treasury Board Department told Global News that approximately $112.1 million in exports could be affected, representing 0.8 per cent of the province’s total United States-bound exports in 2025.
Less than one per cent. On the macroeconomic ledger, that is a rounding error. On the ground it is a small number of specific plants in a small number of specific communities, most of them in wood products, paper, food and alcohol, and most of them too small to have a treasury function, a trade compliance department or a diversification plan.
“These tariffs in aggregate may not harm the overall economy, it would appear, but they are going to do significant damage to local communities,” said Herb Emery, the Vaughan Chair in Regional Economics at the University of New Brunswick, in comments to Global News published Tuesday.
The provincial breakdown makes the concentration visible. The single highest-value affected good is not lumber or whisky. It is cartons, boxes and cases of corrugated paper or paperboard, accounting for $44.2 million of the $112.1 million total, roughly 39 per cent of the province’s identified exposure in one product category. Plywood and finished wood products make up much of the balance, alongside some paper, food and alcohol producers.
Why the aggregate number is the wrong number
The Section 338 tariffs, imposed by three presidential proclamations on July 20 and effective at 12:01 a.m. on August 19, are unusual in the shape of their incidence rather than the size of their aggregate.
The headline coverage is significant but not economy-altering. The United States Trade Representative puts total exposure at close to $20 billion. Global Trade Alert, working from 2025 customs values and excluding goods already caught by Section 232 duties, calculated covered trade at $17.7 billion and found that the measure lifts Canada’s trade-weighted average U.S. tariff by 1.89 percentage points, from 4.37 per cent to 6.27 per cent. Against $364.9 billion in total 2025 U.S. goods imports from Canada, that is a manageable national shock.
The distribution is where the damage sits. Because the proclamations proceed by listed tariff line rather than by sector, the covered goods do not track any coherent industrial category. Thomson Reuters, reviewing Annex II of each proclamation on July 22, found wine, hockey sticks, cement, plywood, furniture, fishing rods, seeds, clothing, wigs and swimming pools on the lists. Global Trade Alert’s line-level analysis found that the largest single covered line, boards and panels for electric control at $1.7 billion, pays no Section 338 duty at all because it is carved out as a Section 232 auto part, while the largest line paying the full 50 per cent is plastic bags at $0.69 billion.
The result is a tariff that lands with full force on a scattered set of mid-sized manufacturers making unglamorous products, while sparing several of the largest covered lines entirely. A national average of 1.89 percentage points is the arithmetic mean of a 50 per cent duty on a corrugated box plant and a zero per cent duty on an electrical panel line. Neither firm experiences the average.
The Maine comparison
Emery’s warning was specific about mechanism, not just magnitude. The firms in the affected categories, he said, tend to share three characteristics that limit their ability to survive a market shock.
“They tend to be small. They tend to be labour-intensive and they tend to have aging founders,” Emery said. “And so you might expect that we’ll start to look a lot more like Maine, which lost a lot of those labour-intensive enterprises 30 years ago with NAFTA.”
The comparison is pointed. Northern Maine’s labour-intensive manufacturing base contracted sharply in the decade after NAFTA came into force, and the communities that lost those employers did not replace them. Emery’s argument is that the causal mechanism is not tariff levels as such but the interaction of a cost shock with a firm that lacks the capital, the management depth and the succession plan to trade through it. An owner within a few years of retirement facing a 50 per cent duty on the product line that supports the plant does not restructure. That owner closes, or sells to a buyer who consolidates production elsewhere.
He pointed to precedent inside the province. “When you look at a place like Dalhousie, Campbellton, which lost its paper mill in the 2000s, you basically see a community that got gutted and has been shrinking and aging,” Emery said.
Both towns sit on the Restigouche in northern New Brunswick. Neither has recovered its pre-closure population. In a province where several affected plants are the principal private employer in their community, the relevant unit of analysis is not the provincial export total but the payroll of individual facilities.
Emery framed the underlying question as a choice about economic structure rather than a tariff response. The province, he suggested, needs to decide what kind of economy it wants to build, one driven by export industries such as forestry or one that tilts further toward government services.
Small business is already paying in uncertainty
The Canadian Federation of Independent Business argues that the cost has begun accruing well before the duty takes effect, in the form of deferred decisions.
“Small businesses are the backbone of small economies; they hire, they have an impact, they have a social impact in every community,” said Frederic Gionet, CFIB’s Atlantic director of legislative affairs. The organization says uncertainty around tariffs is already making it harder for its members to plan investment, hiring and expansion.
This is the part of tariff cost that does not appear in customs receipts. A firm that cannot price a 2027 contract because it does not know whether its product will carry a 50 per cent duty defers the capital expenditure, defers the hire and defers the lease. Those decisions are individually rational and collectively expensive, and they are not recovered if the tariff is later withdrawn.
CFIB has been equally critical of the domestic alternative that governments routinely offer as the answer. Asked about progress on interprovincial trade, Gionet cited the organization’s own member survey.
“We found, and one of the stats we got from our members, nearly 70 per cent, 69 per cent reported not noticing any meaningful change in doing business across Canada over the past 12 months, with 16 per cent reporting that has become more difficult,” he said.
That finding sits awkwardly beside the volume of federal and provincial announcements on internal trade over the past 18 months, including the direct-to-consumer alcohol agreement nine provinces signed on July 21. Whatever has been achieved on paper, roughly seven in ten CFIB members report that nothing has changed in practice. For a New Brunswick manufacturer told to replace American demand with Canadian demand, that is the operative fact.
On the national front, the CFIB has noted that once the August 19 duties take effect they will supersede CUSMA, meaning listed goods that are fully CUSMA-compliant will still face the full tariff. That is the detail most likely to catch smaller exporters, because it inverts the rule they have spent two years learning.
The compliance trap for firms without compliance departments
The Section 338 proclamations create three technical exposures that large importers will manage routinely and small ones may not discover until a shipment is flagged.
The first is that CUSMA origin confers no exemption. Canadian exporters drove CUSMA certification utilisation from 38 per cent of eligible trade to 86 per cent during 2025, according to Global Trade Alert, precisely because certification had been the reliable route to tariff-free entry under earlier American measures. For goods on the Section 338 lists, that certificate is now irrelevant to the duty. A firm that built its customs process around origin certification has built a process that does not protect it.
The second is that the duty stacks. It applies in addition to any other duties, taxes and fees already owed rather than in place of them. Landed cost models that treat tariff rates as mutually exclusive will understate the number.
The third is the foreign trade zone deadline. Goods held in a U.S. foreign trade zone generally need to be admitted in privileged foreign status before August 19 or they will inherit the new duty when entered for consumption, regardless of when they physically arrived. Firms that use an FTZ through a third-party operator should be confirming status in writing this week rather than assuming their operator has acted.
Thomson Reuters described the characteristic failure as a compliance review that stops at the three named categories. A team checks the motor vehicle, alcohol and dairy annexes, concludes exposure is manageable, and discovers weeks later that a furniture or seed-stock line nobody thought to check has been flagged at entry. For a company with one customs broker on retainer and no internal trade specialist, that scenario is not hypothetical.
Complicating matters, the covered lists have not finished settling. U.S. Customs and Border Protection is still expected to issue further guidance, Federal Register corrections and Harmonized Tariff Schedule modifications as implementation proceeds, which means a classification review completed in July may need to be redone in August.
One offsetting development, and its limits
Not every trade line is moving against Canadian producers. In April the U.S. Department of Commerce issued preliminary results in the seventh administrative review of its softwood lumber antidumping and countervailing duty orders, signalling that it intends to cut the combined rate from about 35.16 per cent to 24.83 per cent. The antidumping component would fall from 20.56 per cent to 10.66 per cent and the countervailing component from 14.63 per cent to 14.17 per cent. Final results are expected around mid-August, at which point the lower rates take effect, though the schedule can extend into October if fully drawn out.
The National Association of Home Builders, which has campaigned against lumber duties for years on housing affordability grounds, described the reduction as a positive development in a July 24 note while cautioning that the broader tariff picture is adding uncertainty to the housing market. Canada supplies roughly 85 per cent of American softwood lumber imports and close to a quarter of total U.S. supply, so the rate matters on both sides of the border.
For New Brunswick, the relief is real but poorly matched to the exposure. Softwood lumber is excluded from the Section 338 action because it already carries Section 232 duties, so the two measures do not offset each other at the firm level. A sawmill benefits from the lower antidumping and countervailing rates. A plywood plant or a corrugated box maker gets nothing from the lumber review and takes the full 50 per cent on August 19. The province’s most exposed categories are precisely the value-added wood and paper products that fall outside the lumber orders.
What the province is doing
New Brunswick says Opportunities NB is working directly with companies to prepare for the possible tariffs, with support focused on productivity improvement, market diversification and export development. Those are the correct instruments, and they operate on a timescale measured in years.
Federal countermeasures remain in reserve. Prime Minister Mark Carney has said everything is on the table if negotiations fail while declining to pre-announce retaliation, arguing that responding in advance would be counterproductive. Canada-U.S. Trade Minister Dominic LeBlanc and chief negotiator Janice Charette spent Tuesday and Wednesday in Washington, with LeBlanc meeting Commerce Secretary Howard Lutnick in talks the Canadian side described as constructive and aimed at securing sectoral tariff relief.
There is a live question about whether federal support for affected firms will arrive in time to matter. The pattern in previous rounds has been programme design following tariff implementation by several months, which works for a company with a balance sheet and does not work for one operating on a seasonal line of credit.
The legal instrument behind the shock
The mechanism deserves a plain explanation, because it is new and because it changes how Canadian firms should think about future exposure.
Section 338 of the Tariff Act of 1930 is a provision of the Smoot-Hawley Act, the law economic historians generally credit with deepening the Great Depression by triggering a global wave of retaliation. It was written to enforce reciprocity, giving the president authority to respond when a trading partner treats another country better than it treats the United States. It permits duties of up to 50 per cent on imports from an offending country.
For nearly a century it sat unused. Trade officials note that earlier administrations, including Franklin Roosevelt’s, considered invoking it and never did. The July 20 proclamations mark its first confirmed use.
Its appeal is procedural. A Section 301 action requires a formal investigation by the United States Trade Representative. A Section 232 action requires a Commerce Department national security finding. Section 338 requires neither. The president acts by proclamation alone, without investigation, hearing or public comment period. That mattered a great deal after the Supreme Court struck down the administration’s broader tariffs built on the International Emergency Economic Powers Act in February 2026, removing the most flexible tool in the kit.
Grant Thornton, in a July 28 client note, observed that the August 19 implementation date leaves room for de-escalation while adding that it is unclear whether the administration views the action as a step toward revising CUSMA or as a warning shot ahead of leaving it. The firm advised businesses to scenario-plan across multiple outcomes, including sustained higher costs for imports from both Canada and Mexico. Global Trade Alert’s assessment of the precedent was starker: a dormant statute now overrides a trade agreement’s core preference on a presidential finding alone, and the risk is repetition.
For a New Brunswick manufacturer, the operational implication is that the list of protected goods is no longer stable in the way it has been for three decades. A product exempt today can be listed by proclamation without notice. Firms that have treated CUSMA as a permanent floor under their market access need to treat it instead as a preference that holds most of the time.
The CUSMA review as background risk
The tariff arrives while the agreement that governs most Canada-U.S. trade is in an unfamiliar posture. The Trump administration declined to grant CUSMA a blanket renewal at the start of July, triggering an annual rolling review that repeats every year until the pact sunsets in 2036 unless all three governments agree to extend it.
Washington and Mexico City have begun formal talks. Ottawa and Washington have not. U.S. Trade Representative Jamieson Greer told the Senate Finance Committee on July 22 that he hoped to have options for the three leaders to consider before the end of the year, and identified rules of origin, the trade deficit with Mexico, and Mexican labour and environmental standards as his priorities. Rules of origin in particular matter to any New Brunswick firm shipping a product with imported inputs, because tightening them raises the bar for the certification that is already worth less than it was.
President Donald Trump told Fox News on Tuesday that he did not “really want to” update the agreement, adding, “I’d rather be independent.” He said Mexico and Canada need the United States rather than the reverse. Those comments landed the same day LeBlanc arrived in Washington.
Implications for Canadian businesses
Three lessons generalize beyond New Brunswick.
The first is that provincial and national exposure figures are close to useless as a guide to firm-level risk under a line-by-line tariff. Any Canadian exporter should be checking its own Harmonized System codes against the published annexes rather than relying on a sector-level or provincial estimate. A province with 0.8 per cent exposure can contain firms with 100 per cent exposure.
The second is that concentration is now a priced risk. A manufacturer with one large American customer and no alternative channel has a vulnerability that a foreign government can convert into a cost with a single proclamation and no investigation. That is an argument for diversification as a standing discipline rather than a crisis response, and it is an argument small firms have heard for decades without the capital to act on it.
The third is that the interprovincial trade file has become load-bearing. Every federal and provincial answer to American tariffs eventually routes through the proposition that Canadian firms can sell more inside Canada. CFIB’s own members say that has not become materially easier in the past year. Until it does, market diversification advice offered to a New Brunswick box plant is advice to find customers in a market that remains harder to reach than Boston.
Twenty-one days remain before the duties take effect. For the province, the number to watch is 0.8 per cent. For the firms inside it, the number is whatever share of their revenue crosses the border in August.