Canada's 50% retaliatory tariffs take effect as US trade talks stall
The dollar-for-dollar retaliation marks an escalation in the dispute between the neighbouring countries, and U.S. and Canadian officials have traded blame for scuttling a deal that seemed close to fruition two weeks ago
Canada's retaliatory tariffs on U.S. goods took effect just after midnight on Tuesday as Prime Minister Mark Carney increased economic pressure on his country's biggest trading partner after negotiations collapsed last month, intensifying an 18-month-old trade war.
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The counter-tariffs cover $20 billion of U.S. goods, with duties ranging from 15% to 50% across products from steel and furniture to clothing and electronics.
The dollar-for-dollar retaliation marks an escalation in the dispute between the neighbouring countries, and U.S. and Canadian officials have traded blame for scuttling a deal that seemed close to fruition two weeks ago.
The rising tensions create uncertainty about the broader U.S.-Mexico-Canada free trade agreement, which is up for annual reviews after U.S. President Donald Trump declined to extend it for another decade.
"What we are worried about is an escalatory spiral," said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Carney's advisory committee on bilateral U.S. economic relations.
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"But at the same time, we totally understand that the prime minister needs to find areas of leverage," Harvey said.
Trump's tariffs implemented last month hit sectors including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment, covering $20 billion, or 5%, of Canadian exports to the U.S.
According to Canadian and U.S. government data, Canada has shipped almost 68% of total exports to the U.S. this year, out of which roughly 80% moved duty-free due to exemptions under the United States–Mexico–Canada Agreement (USMCA).
Protections under the agreement have provided the domestic economy some resilience.
The new tariffs, imposed under a Depression-era U.S. law, do not allow Ottawa to exercise USMCA exemptions.
Concerns about the USMCA's future have fuelled uncertainty about investment and growth, as Canada wages a trade war against an economy 13 times its size.
Polls show Carney has broad support from Canadians, but it could disappear within months as the consequences of the trade war sink in, according to political analysts.
Just 20% of Americans approved of Trump's tariffs on Canadian goods, a Reuters/Ipsos poll found.
Carney said last week his government was ready to sign a trade deal that benefits both countries.
Trump threatened last month to raise U.S. tariffs on all cars, trucks and automotive parts from Canada to 50% starting January 1, and signed an executive order renaming Lake Ontario as Lake America.
A government source said there are currently no talks between the two sides among ministers or government officials.
"The Canadian government needs to keep channels open to the United States and not go overboard in terms of rhetoric and reacting to the rhetoric from the American side, while waiting for the American decision-making process to come back to economics," Harvey said.