The United States and Canada have now entered an open trade conflict, after the collapse of last-minute negotiations in Washington.
Shortly after midnight , US tariffs of 50% on about $20 billion worth of Canadian goods went into effect, with Ottawa responding almost immediately to retaliate in full. It is the most serious rift between two countries that for decades were considered a model of trade and military alliance.
The new tariffs cover about 5% of Canadian exports to the US and hit a strikingly diverse list of products: from hockey sticks and fishing equipment to plywood, cement, alcoholic beverages, furniture, clothing and wooden tongue depressors for medical tests.
Canadian Prime Minister Mark Carney said his country would respond “dollar for dollar,” with countermeasures taking effect on Sept. 8 and targeting steel, dairy, home appliances, agricultural equipment, pulp and paper and electronics. Details will be announced in the coming days.
Both sides are blaming each other for the debacle. US Trade Representative Jamieson Greer said Canada refused to finalize the deal on the terms agreed earlier in the week, made new demands at the last minute and backed away from previous commitments, upsetting the delicate balance that had been struck.
The American proposal, as he described it, called for tariff reductions on cars, steel, aluminum and lumber — sectors sensitive to Ottawa — as well as cooperation on export controls. He called Canada’s withdrawal a missed opportunity for a partnership with the fastest-growing G7 economy.
Carney countered that the last-minute changes to the American terms were “unfair and economically damaging” and called into question the credibility of any deal. “They asked for too much and gave too little,” he said from Ottawa, announcing that he was suspending negotiations and instructing the Canadian team to return. He also revealed that Ottawa was willing to lift remaining retaliatory tariffs on steel, aluminum and cars if the United States substantially reduced its own, and to encourage provinces to restore sales of American spirits. He accused Washington of using economic integration as a weapon and of attempting to limit Canada’s ability to make trade deals with third countries, which he described as an affront to its sovereignty.
The US side has a different reading of the starting point. Greer had earlier pointed out that the 50% tariffs are essentially retaliation for the measures taken by Ottawa in the past, noting that only two countries in the world have retaliated against US trade measures and those countries are China and Canada. On Saturday, he said that no new round of talks is planned and announced additional measures in response to the Canadian retaliation, without specifying them.
The development marks a sharp reversal of mood. Just two days earlier, Canadian Minister for Relations with the United States Dominique LeBlanc had been talking about a deal “very close,” while Trump had extended Wednesday’s original deadline by three days, citing an imminent deal. The deadline finally expired at 12:01 a.m. Saturday, with no result.
The political implications could go beyond the economic. The two countries traded $880 billion in goods and services last year, and the 5,525-mile border remains largely unguarded, with nearly 330,000 people and $2 billion worth of goods crossing daily. About 800,000 Canadians live in the United States, and Canadian soldiers fought alongside Americans in Afghanistan after 9/11. Trade frictions are not new — lumber and Canada’s protected dairy market have been points of contention for decades — but they have never led to a rupture on this scale.
The future of the US-Canada-Mexico trade agreement , which is crucial for the industry of all three countries and is already under review, is now in doubt. Carney has described the new measures as a direct violation of it.
Domestically, the reaction was mixed. Republican Senator Susan Collins pointed out that her state, Maine, imports $2 billion worth of Canadian goods annually and called on the government to return to the table. The Business Roundtable warned that tariffs and retaliation were increasing costs for American businesses, while analysts said the burden would be passed on to households. The timing is difficult for Trump, who is facing falling polls, a prolonged conflict with Iran and a midterm election in November . In Canada, the prime minister has been criticized for both the concessions he was willing to make and the collapse of the talks, with Ontario Premier Doug Ford supporting his stance.
Washington’s shift to bring manufacturing back to the U.S. and Trump’s repeated references to turning Canada into the “51st state” have changed the context. As Carney summarized, Canada has recognized that “America has changed” and that the two countries will not return to their old relationship.
