Canada’s latest round of retaliatory tariffs on American products came into force shortly after midnight Tuesday, as Prime Minister Mark Carney moved to turn up the economic pressure on the country’s largest trading partner following the breakdown of talks last month — a development that has deepened an already 18-month-long trade fight.
The countermeasures apply to roughly $20 billion worth of US imports, with tariff rates spanning from 15% to 50% on a wide mix of goods, including steel, furniture, apparel and consumer electronics.
The dollar-for-dollar response represents a sharp new phase in the dispute between the two neighboring economies. Officials in Washington and Ottawa have each blamed the other for derailing an agreement that, just two weeks ago, appeared to be within reach.
The escalating trade tensions are also casting fresh doubt over the future of the US-Mexico-Canada free trade agreement, which now faces annual reviews after US President Donald Trump chose not to renew the pact for another 10 years.
“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 US economic relations.
“But at the same time, we totally understand that the prime minister needs to find areas of leverage,” Harvey said.
US TARIFFS HIT CANADIAN WINE, FURNITURE, DAIRY
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 US.
According to Canadian and US government data, Canada has shipped almost 68% of total exports to the US this year, out of which roughly 80% moved duty-free due to exemptions under the USMCA pact. Protections under the agreement have provided the domestic economy some resilience.
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The new tariffs, imposed under a Depression-era US 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 US 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.