Canada digs in for protracted trade war as tariffs on US goods take effect

Retaliatory Canadian tariffs on a wide range of American goods came into force on Tuesday, with no sign that the two nations are any closer to resuming trade talks after negotiations collapsed in late August. The counter-measures, described by Prime Minister Mark Carney as “dollar-for-dollar”, will apply to nearly C$28bn worth of US products, from steel and aluminium to furniture and cotton T-shirts, with duties reaching as high as 50 per cent. Fresh fish and lobster were initially included on the list, but Ottawa later omitted them following pushback from Canada’s seafood industry, a reminder of the delicate balance the government must strike as it retaliates against its largest trading partner while seeking to shield domestic producers from unintended harm.

Both US and Canadian officials have publicly expressed a desire to reach an agreement, yet no substantive progress has been made since talks broke down in the final week of August. Speaking to reporters last week, Carney said Canada remained ready to strike a deal that would be “durable” and serve the best interests of both countries. “We’re ready to sit down and strike that deal when the Americans are ready,” he said. His counterpart in Washington offered a different interpretation of the impasse. US trade representative Jamieson Greer told Fox News on Thursday that the ball was in Canada’s court. “We offered them the best deal, they looked at it square in the face and turned around,” Greer said, adding that communication with Canadian officials had been sparse since the talks collapsed. In a separate interview with Canadian broadcaster CBC, Greer cautioned against retaliation and suggested that Washington might respond by banning the import of some Canadian products.

President Donald Trump escalated the rhetoric over the weekend, threatening on Monday to halt all US business with Bombardier, the Canadian aerospace giant, unless it moved its manufacturing operations south of the border. The company, one of the largest in the country, contributed more than C$7bn to Canada’s annual GDP in 2024, according to a report by accounting firm PwC. Trump also used his Truth Social platform to attack Canada’s exchange rate, calling it “unacceptable”, and posted a map of North America — including Canada, Mexico and Greenland — overlaid with the US flag. The provocations have done little to ease tensions in a bilateral trading relationship valued at nearly $900bn in 2025, the largest in the world.

The United States currently maintains a 25 per cent tariff on Canadian cars and trucks, alongside duties on Canadian steel, aluminium and lumber. In late August, Trump imposed new 50 per cent tariffs on other goods, including dairy, alcohol, hockey sticks and perfume. From Tuesday, Canada’s retaliatory tariffs, ranging from 15 to 50 per cent, will be applied to hundreds of items imported from the US. American milk, golf clubs, steel, aluminium and certain clothing such as jackets and T-shirts will face the highest rate of 50 per cent. Cheese, toilet paper and household appliances like air conditioners will be hit with 25 per cent duties, while fork-lift trucks and industrial moulds will attract 15 per cent tariffs. These new levies are in addition to existing retaliatory taxes Canada had already placed on finished American cars and trucks that do not comply with the free trade agreement between Canada, the US and Mexico, known as the USMCA in Washington and CUSMA in Ottawa.

Public opinion in Canada appears to favour the government’s强硬 response. Polls suggest a majority of Canadians support the imposition of retaliatory tariffs on the US. Economists, however, have warned that the latest counter-measures will push up prices for consumers on everyday goods, from clothing and food to furniture. The Canadian Chamber of Commerce has urged the Carney government to adopt a more surgical approach to retaliation. “Businesses understand retaliation but don’t want to see endless escalation,” said the Chamber’s CEO and President Candace Laing in a statement to the BBC on Friday, though she added that businesses “are preparing for this trade dispute to last”. The last-minute removal of seafood items from the tariff list, following pushback from the fisheries industry, illustrated the difficulty of calibrating retaliation without inflicting collateral damage on the domestic economy. The lobster industry in both Canada and the US is heavily interdependent, with American-caught lobster often sent north for processing before being shipped back to the US for sale.

Before the latest wave of tariffs, Canada’s economy had shown signs of resilience. GDP grew at an annualised rate of 3.3 per cent in the second quarter, and the economy added 181,000 jobs between April and July. But August, a month that coincided with the imposition of new US tariffs and the collapse of trade talks, saw a loss of some 41,000 jobs. One sector that recorded a modest gain was manufacturing, a rise the Canadian government attributes to consumers and businesses buying more domestically produced goods. Carney has spoken of his desire to diversify Canada’s trade away from its over-reliance on the United States. July figures showed that the share of Canadian exports bound for the US had dropped to 66 per cent, down from an average of 75 per cent before the trade war began, suggesting that some shift may already be underway. For now, however, the two neighbours remain locked in a standoff, with no clear path back to the negotiating table and businesses on both sides of the border bracing for a prolonged and costly dispute.