Iranian Sanctions, Canadian Tariffs: A Double Whammy
Engaging in a tariff war with Canada fractures allied cooperation and destabilizes the US economy while Washington struggles to manage simultaneous crises in the Middle East and global sanctions
By Anil Madan
With which country does the US have the closest ties of friendship and cooperation? If you had asked that question just three years ago, the unsurprising answer would have been either Britain or Canada. The US-Canada bond has been more than one of geography. Both countries are neighbours, friends, and competitors in hockey. Canadians cheer on baseball and football teams in the US and are fans of American professional golfers and tennis players.
Americans welcome Canadian tourists and snowbirds heading south for the winter as friends. A common language unites us; quirks of pronunciation and enunciation separate us. Minus the geography, much the same may be said of Brits. Other countries with close relationships to the US would include Australia, Taiwan, South Korea, and Japan.
If one had asked to name countries with the worst relationship, it is a fair bet that Iran, North Korea and China would have been at the top.
It was jarring, therefore, to hear Canada’s Prime Minister, Mark Carney, declare that what he had earlier described as a rupture in the relationship between the US and Canada, had escalated so that our two nations are now at war. “We were attacked. You’re at war when you get attacked. We got attacked,” Mr Carney said.
What prompted Mr Carney’s defiant and firm lamentation was President Trump’s imposition of new 50% tariffs on about $28 billion of Canadian imports (beer, cheese, electronics, etc.), alongside existing tariffs on aluminum, lumber, vehicles and steel.
Given the US Supreme Court’s earlier ruling that Trump’s imposition of tariffs violated the law, one might have thought that the end of the tariffs was just grandstanding. But Trump’s obsession with tariffs has not abated. He purports to act on a different legal basis, Section 338 of the Tariff Act of 1930, allowing up to 50% tariffs on imports from countries deemed to discriminate against US commerce. Undoubtedly, legal challenges will follow.
A Transactional Foreign Policy
It is not clear how Canada’s exports to the US discriminate against US commerce, but Mr Trump has also accused Canada of “ripping off” the US and of wanting all the benefits of being a state within the Union without being a state. Whether this is a revival of his nascent desire to annex Canada as America’s 51st state or something else, it anyone’s guess. A part of the answer lies in Mr. Trump’s perception that other countries, such as China, have been ‘ripping off’ the US, and that even its allies in NATO — as well as Japan, Taiwan, and South Korea — have not paid adequately for American protection.
Mr Trump’s view of security then becomes that of a salesman. It is a transactional view, perhaps even a zero-sum calibration. Missing from the equation is any weight to be given to the benefits to America and the rest of the world from having economically stable and secure markets, and physical security for nations with whom we trade and interact daily. Nor do his calculations take into account that demanding more self-reliance by its allies poses the danger that they will focus on proliferating the most dangerous types of weapons to get the most bang for their buck in terms of lethality as well as deterrence.
The emergence of this sort of danger can be seen in Carney’s framing and response. He declared that Canada is “effectively ‘at war’ with the United States over trade,” calling it “a power play” and “a question of sovereignty.” Even three years ago, one would have been hard pressed to predict that a Canadian Prime Minister would declare that his nation was at war with its closest neighbour and longstanding friend.
Accordingly, Canada plans dollar for dollar retaliation, with tariffs on American exports of steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics starting Sept. 8. The potential negative impact on Canadian businesses is to be ameliorated by C$25 billion in assistance to affected firms.
Carney called off talks with the US aimed at reaching a deal on mutual tariffs and free trade. He accused Washington of making last minute demands touching French language, Quebec culture, Canadian identity, and alignment of Canada’s wider trade policy with US tariffs — calling it “no longer about a trade deal, it is about a takeover of Canada’s sovereignty and identity.”
The economic stakes are immense for Canada and significant for the US despite its much larger economy:
* US–Canada trade in 2025: about $879.9 billion total, with US imports of $453.6 billion and exports of $426.3 billion; the US runs a modest deficit.
* Earlier data show goods trade of $791.7 billion and services of $216.4 billion in 2023, underscoring how deeply integrated the two economies are.
* Economists estimate up to 90,000 Canadian jobs at risk; small and midsize firms (like a Manitoba honey farm that sells 90% of its output to the US) face existential pressure from 50% tariffs.
US officials argue Canada has long enjoyed exceptionally favourable access to the US market and warn that retaliation will backfire on Canadian workers, while Canadian leaders talk openly about diversifying away from the US and even considering energy exports (oil, gas, electricity, critical minerals) as leverage — which Carney for now abjures based on his concern about damaging Canada’s reputation as a reliable supplier.
Canada has been diligently at work in diversifying the customer base for its goods and services and has made trade deals with India, China, Europe and other countries.
* * *
US Sanctions on Iran: The High-Stakes Game in Hormuz
At the same time, the Trump administration has paused its airstrikes and missile attacks on Iran and framed its current campaign as an attempt to economically suffocate the Iranian regime rather than rely solely on bombing. “Dubbed ‘Operation Economic Outcast,’ the initiative is aimed at closing loopholes in the existing US financial dragnet around Iran. This, according to Treasury Secretary Bessent, is forcing an “endgame” in the conflict that President Trump launched in February.
Treasury officials added five sectors to the target list: cryptocurrency used by the Islamic Revolutionary Guard Corps (IRGC) and regime insiders, weapons-related technologies, gold used to stabilize the currency, Iran’s airlines, and shipping that carries weapons components and oil, alongside sanctions on 60 entities, individuals and vessels tied to nuclear/missile procurement, cyber operations and oil sales.
The State Department’s sanctions announcements in 2025 and 2026 show a steady tightening on:
* Oil and shipping networks:repeated actions against Iran’s “shadow fleet,” illicit petroleum traders, and Iran–China oil trade.
* Financial and digital channels:sanctions on shadow banking, digital asset exchanges, and cash pipelines used for terror finance and sanctions evasion.
* Military and cyber:measures targeting weapons procurement networks, ballistic and nuclear supply chains, and cyber groups accused of attacks on US infrastructure.
Politically, figures like John Bolton openly describe the goal as “pulling the regime apart at the top and causing instability in the country.” The hope — or bet — is that economic pressure and sanctions will eventually fracture the security apparatus.
Oil flow through the Strait of Hormuz
Whereas Iran claims that the Strait of Hormuz is effectively closed to shipping, that claim is contested by US Central Command which says that significant — though reduced — oil still moves:
“The shipments are still far below the fuel exports before the war, when about 20 million barrels per day of crude oil and products passed through Hormuz. But the US military’s figures indicate that a substantial amount of oil is passing through the strait despite Iranian threats and attacks.”
US Central Command claims that:
* 660 million barrels of crude shipments were assisted by the US through Hormuz since early May.
* At least 160 million barrels (over 7 million barrels per day) in the past three weeks passed through the Strait.
For perspective, the pre-war baseline was about 20 million barrels per day of crude and products transiting Hormuz.
Some private tracking estimates put crude exports at about 1.6 million barrels per day in May, about 4 million in June, about 5 million in July, with August expected higher — suggesting scaling flows but still below pre-war levels.
Iran claims the strait is closed until US obligations under a June 17 interim peace deal are met, while Trump insists “the strait is open and under US control.” Hormuz is split between a US-protected southern route along Oman and a northern route under Iranian pressure, with at least 17 commercial ships attacked in July and August.
Recent reporting reinforces that picture: Iran and Oman have discussed a joint temporary corridor and mine clearing project, but the IRGC says the strait will remain closed unless Washington accepts Tehran’s conditions, while Trump publicly claims, “a lot of oil is pouring out.”
The upshot is that oil flows are volatile, heavily militarized, and well below pre-war volumes — but still large enough (roughly mid-single to low double digit millions of barrels per day depending on whose data you trust) to keep global prices high without triggering full scale supply panic.
How the Iran sanctions and the Canada–US trade fight interact
The Iran sanctions are tightening global oil supply and raising prices; the Canada–US tariff war is tightening North American supply chains and raising costs. Together, they amplify inflation, political pressure, and strategic leverage — and they increasingly shape each other’s trajectories.
Oil prices will mirror effects between the two crises. Shipments are still far below exports before the war, when about 20 million barrels per day passed through Hormuz. Only three or four vessels have passed through the strait on a daily basis in the month of August.
Even with US military escorting tankers, the flow is unstable and contested. The price of Brent crude is already elevated — in the low to mid $90s — and any escalation could push prices sharply higher.
Higher oil prices directly worsen the US–Canada trade fight:
* Canada is one of America’s largest suppliers of crude, refined products, natural gas, and electricity.
* As prices rise, Canada’s energy exports become more valuable — increasing Ottawa’s leverage.
* Canadian leaders are already hinting at using energy as a pressure tool. Doug Ford said: “We have to make sure we look at every single asset we have… everything is on the table.”
Carney himself warned the US is deeply dependent on Canadian energy and added: “I don’t think they want us to stop sending it.”
If Hormuz tightens further, Canada’s energy becomes even more strategically indispensable, making Washington’s tariff pressure harder to sustain.
Sanctions on Iran tighten global supply just as tariffs tighten North American supply
The new sanctions package (“Operation Economic Outcast”) targets:
* Iran’s oil shipping networks
* Gold reserves stabilizing the currency
* Airlines and shipping
* Cryptocurrency channels used by the IRGC
* 60 entities tied to nuclear, missile, cyber, and oil operations
This is designed to choke Iran’s ability to export oil — and it’s working. The US Navy blockade has isolated Iranian ports.
As a result, global supply is constrained at the same moment the US is imposing 50% tariffs on Canadian goods — including critical manufacturing inputs.
This creates a double inflation shock: energy inflation from Middle East instability, and goods inflation from North American tariffs
Canada’s retaliation becomes more potent when the US is fighting an oil war
Canada’s retaliatory tariffs, effective September 8, target steel, dairy, appliances, agricultural equipment, electronics, and pulp and paper.
But the real latent weapon is energy should Canada use it. If the Iran conflict escalates and Hormuz flows drop further, Canada’s energy becomes even more essential.
In short, the more the US squeezes Iran’s oil, the more leverage Canada gains in its tariff confrontation. The Trump administration should have no desire to goad Carney into using energy supplies as a weapon.
Washington is now juggling a Middle East oil chokepoint, a North American trade war, rising inflation, a politically sensitive election environment, and a global sanctions campaign requiring allied cooperation.
Canada is not just an ally — it is one of the US’s largest trading partners and a major energy supplier. A tariff war with Canada undermines US unity with allies during a major Middle East conflict, global support for Iran sanctions, and domestic economic stability.
Jamieson Greer the US representative warned: “Canada’s retaliatory strategy will backfire on Canadian workers.” He should be more concerned that it will backfire on the US, especially if Iran escalates in Hormuz and is successful in curbing oil flows.
Cheerz…
Bwana
Mauritius Times ePaper Friday 28 August 2026
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