Canada hits back at Trump with retaliatory tariffs from Sept 8 after US trade talks fail

The Canadian tariffs will match the US measures dollar for dollar. They will cover products including steel, dairy, appliances, agricultural equipment, pulp and paper and electronics, reported AP. Carney said Canada will release the detailed list of products in the coming days.

The move came after the United States imposed 50% tariffs on about $20 billion worth of Canadian products early on Saturday. The US tariffs affect about 5% of Canada’s annual exports to the United States.

Carney said Canada had tried to reach a deal with Washington. Ottawa had offered to remove its remaining retaliatory tariffs on US steel, aluminum and automobiles if the US substantially reduced its own tariffs.

Canada also offered to encourage provinces to restore sales of US alcohol. But the final US demands went too far, Carney said. “They asked too much and offered too little,” he said.

US Trade Representative Jamieson Greer gave a different account. He said Canada had rejected the terms of a proposed deal despite a US offer that would have given Canada the best treatment among major exporters to the US market. “New demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days,” Greer said in a statement.

Carney said the US demands were “unfair, uneconomic” and raised questions about the reliability of any future agreement.

Why did the trade talks collapse?

The breakdown came after both sides appeared close to an agreement just two days earlier. Canada wanted relief from US tariffs on steel, aluminum, automobiles and lumber. Washington wanted Canada to make further concessions.

The talks ended without a new agreement. No further negotiations are planned for now, AP reported.

Carney said Canada had never intended to accept an agreement at any cost. Its aim was to secure the best possible deal. “Never a deal at any price or on any deadline,” he said.

The US tariffs were initially due to take effect at 12.01 am on Wednesday. President Donald Trump extended the deadline by three days to give negotiators more time. The extension did not produce an agreement.

Ontario Premier Doug Ford backed Carney’s decision. He said the prime minister had his “full support” for retaliation and called for “tariff for tariff, dollar for dollar”.

The dispute now threatens a relationship that has traditionally been among the closest in the world.

The US and Canada exchanged about $880 billion worth of goods and services last year, reported AP. Nearly 330,000 people and about $2 billion worth of goods cross the 5,525-mile border each day.

The border remains undefended, and the two countries have long cooperated on trade, security and defence.

But Trump’s approach has changed the relationship. He has imposed tariffs on Canadian products as part of his effort to bring manufacturing back to the United States. He has also repeatedly talked about making Canada the 51st US state.

Carney said Canada now accepts that its relationship with the US has changed. “America has changed,” Carney said. He added that the two countries would “not return to our old relationship.”

How could the tariffs affect both countries?

The immediate economic impact will depend on the products covered by the new tariffs and how businesses respond. Canada sends a large share of its exports to the United States. Nearly 72% of Canada’s goods exports went to the US last year, reported AP.

Canadian businesses therefore have a major interest in maintaining access to the US market. US companies and consumers could also face higher costs. Import tariffs are paid by US importers, who may pass some of those costs to consumers through higher prices.

Ryan Majerus, a partner at King & Spalding and former US trade official, said both countries would face pressure to find a way out of the dispute.

“Either way, I think both sides will be under immense pressure in the coming days to still find an off-ramp,” Majerus said, according to AP report. “But if Canada has agreed to also impose tariffs, the off-ramp may be even harder to find,” Ryan said. 

Candace Laing, president and CEO of the Canadian Chamber of Commerce, called the US tariffs “a body blow to North American competitiveness”. She warned that the measures could increase costs for Americans while hurting Canadian consumers, investment and small businesses.

The dispute also comes as the three North American countries prepare to review the US-Mexico-Canada Agreement (USMCA). The United States has already started formal talks with Mexico on changes to the trade agreement. Talks with Canada have not begun.

Why is Trump using a century-old tariff law?

The latest US tariffs rely on Section 338 of the Tariff Act of 1930, a law from the Great Depression era. Trump has turned tariffs into a central part of his second-term economic policy. After the Supreme Court ruled in February that he had exceeded his authority with earlier trade penalties, his administration looked for other legal routes to impose tariffs.

Section 338 allows the president to impose import taxes of up to 50% on goods from countries that discriminate against US businesses. The provision does not require an investigation before tariffs are imposed and does not set a time limit for the measures, reported AP.

The law dates back to the period of the Smoot-Hawley tariffs, which economists and historians widely associate with a sharp reduction in global trade during the Great Depression. Section 338 has never before been used to impose tariffs, according to AP report.

The Canada dispute also reflects a broader shift in the North American relationship. Barry Appleton, senior fellow at the Center for International Law at New York Law School, said both governments had now publicly committed to retaliation and resistance.

“Both sides have now committed themselves in public, which is how escalation stops being a choice,” Appleton said, as per AP report.