Carney accuses Trump of seeking to destroy Canada's car industry as trade war intensifies

President Donald Trump has threatened to double tariffs on Canadian automobiles, raising the stakes in the rapidly escalating trade war between the two neighbours after negotiations collapsed late last week. The president said on Monday that he would increase tariffs on Canadian cars, trucks and auto parts from 25 per cent to 50 per cent as of 1 January, a move that would deal a heavy blow to Canada's automotive sector. The threat followed the breakdown of trade talks on Friday night, with each side accusing the other of making unreasonable last-minute demands.

Canada's Prime Minister, Mark Carney, called the latest levy threat unsurprising and accused the president of wanting to destroy Canada's auto industry. He added that Ottawa was ready to resume talks only if Washington came with the "right attitude". Earlier on Monday, Carney had declared that Canada would counter American levies with reciprocal tariffs on US goods "dollar for dollar", and announced C$11bn in funding to build six icebreakers at a Quebec shipyard for the Canadian Coast Guard, a move aimed at diversifying Canada's trade infrastructure.

The collapse in talks marked a significant shift from earlier in the week, when both sides had appeared optimistic that a new deal could be reached. Canadian officials said the US introduced last-minute demands that were "unacceptable", including a clause limiting which countries Canada could sign trade deals with. US officials, however, insisted that it was Canada that had introduced last-minute changes. "They wanted more," the US Trade Representative, Jamieson Greer, told CNBC on Monday.

The war of words has intensified, with Ontario's outspoken premier, Doug Ford, whose province is home to Canada's auto manufacturing industry, telling the US president to "kiss my ass" in response to the tariff threats. Ford also suggested that Canada should charge the US extra for its oil, gas, electricity and critical minerals, and said he would be speaking to Carney about ways to "fight back". His comments appeared to catch the attention of Trump, who on Truth Social accused Ford of "bluster" and wrote: "Someone should get these clowns to 'fall in line' or, the consequences for Canada will be far WORSE!"

Canada accounts for 60 per cent of total US crude oil imports and close to 100 per cent of US natural gas exports, according to Canadian government data. Businesses on both sides have warned that they stand to be hurt by the new wave of US tariffs, as well as the retaliatory tariffs that Canada plans to impose on 8 September. In Portland, Oregon, Mike Roach and Kim Osgood, owners of Paloma Clothing, said the price of one of their best-selling items – specially designed pillows made in Canada – could shoot up by around 50 per cent to $90. For now, they are holding out on keeping prices steady, hoping that the "tariff problem" is worked out soon, said Roach. "It would be one thing if we had three months' notice – that would be something you could plan around, do some work with the vendors," he said. "But when it happens literally overnight you're really stuck."

The rapidly escalating trade war is also raising questions about Mexico and the future of the USMCA trade pact between the three North American neighbours. Both Canada and Mexico have said they want the agreement extended for another 16 years, but Washington has said it will not renew the pact in its current form. Escalating trade tensions mean "the risk of the USMCA unravelling has increased", experts from the Oxford Economics forecasting firm warned on Monday. That, in turn, "would plunge Canada into recession and leave it on a permanently lower growth path". Late on Monday, Canadian officials announced a news conference for Tuesday where they would outline how the country would respond to the trade war and work to "protect and support Canadian workers and businesses during these challenging times".