US and Canada risk a trade war after 50% U.S. tariffs take effect

Negotiations over tariffs between the United States and Canada collapsed and new U.S. duties of 50% on a range of Canadian goods took effect over the weekend, pushing the two neighbours toward what Ottawa calls a trade war. The measures target Canadian exports worth about $20 billion and cover items including hockey sticks, furniture and wine.

Canadian prime minister Mark Carney announced retaliatory duties that Ottawa says will come into force on September 8 and warned they will hit U.S. steel and dairy industries especially hard. Asked why the situation looks like a trade war, Carney said: "When you are attacked, then you are at war - and we are attacked."

U.S. tariffs had originally been scheduled to start earlier in the week but were briefly delayed after the U.S. president decided to push their start date back. Intense talks took place during that pause but failed to produce a deal.

Carney described the terms offered by Washington as "unfair" and "economically nonsensical." He told reporters: "We cannot accept what they offered, nor will we give them what they demanded." On the other side, U.S. Trade Representative Jameson Greer blamed Canadian negotiators, saying Ottawa refused to sign an agreement on conditions that had allegedly already been settled — despite U.S. offers to cut tariffs on steel, cars, lumber and aluminum in exchange for Canadian concessions.

Political backlash and wider risks

President Donald Trump reacted sharply to Ottawa's announcement on his social platform, writing: "Canada wants federal privileges, without it being one." Democratic members of Congress and governors from border states including Minnesota, New York and Washington condemned the administration's tariff policy. New York Governor Kathy Hochul wrote on X: "Starting unnecessary conflicts with allies, while raising prices at home - that is Trump's economic policy in one sentence."

Analysts warn the escalation jeopardises the future of the USMCA trade arrangement. U.S. tariffs no longer carve out exceptions for Canadian goods that had been protected under the USMCA — an agreement that, the article notes, provided cover for much Canadian exports in the past 18 months and was negotiated under Trump to run for a further 16 years, a step the U.S. has so far rejected.

Business groups pressed both capitals to reopen talks. The influential Business Roundtable urged Washington and Ottawa to resume negotiations, warning higher tariffs could raise costs significantly for U.S. companies. The close integration of the two economies — roughly 70% of Canadian exports go to the U.S. market — means a tit-for-tat escalation could be costly. "If the Canadian government retaliates with tariffs and Trump responds with a new escalation, the two sides will enter a costly and damaging spiral of reciprocal measures," warned Richard Fontaine, director of the Center for a New American Security, on X.

For now, U.S. officials say no new negotiations are scheduled despite appeals from business leaders, leaving September 8 as the date when Ottawa plans to begin its countermeasures unless a last-minute breakthrough occurs.

Photo: press material from the event