US-Canada trade war deepens as talks collapse and 50 per cent tariffs hit goods

Washington,UPDATED: Aug 22, 2026 23:36 IST

The United States and Canada have moved deeper into a trade war after talks in Washington collapsed, with both sides blaming each other and announcing fresh tariffs that are expected to push up prices in both countries. The US has imposed 50 per cent tariffs on USD 20 billion worth of Canadian goods, while Canada has said its retaliatory measures will begin on September 8.

The breakdown marks a sharp deterioration in ties between two long-standing allies and trading partners. No further talks are planned for now, and the dispute has also raised fresh doubts over the future of the North American trade pact involving the United States, Canada and Mexico.

President Donald Trump's new import taxes will affect about 5 per cent of Canada's yearly shipments to the United States, covering products ranging from hockey sticks to tongue depressors. Prime Minister Mark Carney said Ottawa would respond with targeted tariff protection for sectors exposed to the new US duties, including some steel products, as well as dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Carney accused Washington of using "economic integration as a weapon" and said "its signature was written in pencil". Using the language of conflict, he said Canada had been "attacked" by the new tariffs. "You're at war when you get attacked," he said, adding that Canada had the reserves, resilience and plan to respond.

But Jamieson Greer, Trump's chief trade negotiator, said the US had been forced to act after a year of retaliation by Canada. "We've said enough, and so we've taken countermeasures. Our interest is in protecting American workers and protecting American supply chains," the US trade representative told Fox & Friends Weekend.

Carney said Canada had been ready to remove its remaining retaliatory tariffs on steel, aluminium and cars if the US made major cuts to its own duties, and to encourage provinces to resume sales of US alcohol. But he said Washington's final demands went too far. "They asked too much and offered too little," Carney said. He added that the US introduced last-minute conditions that would have reduced relief for Canadian-made vehicles, limited Canada's ability to make trade deals with other countries, and weakened protections for language, culture and sovereignty. He said those demands were "unacceptable".

Greer said the administration had offered to lower tariffs on steel, cars and lumber, calling them "things that are sensitive for them". He said Canada has "always had the best deal, and they still would have an even better deal, but they didn't want that". He added, "We're moving forward with measures that respond to Canadian retaliation."

The collapse in negotiations was a reversal from just two days earlier, when officials on both sides sounded close to a compromise. The tariffs had originally been due to start at 12.01 am on Wednesday, but Trump extended the deadline by three days to keep talks going. Ontario Premier Doug Ford backed Carney's decision to reject the deal, saying it would have hurt the province's car, steel and manufacturing sectors, and urged Canada to use "every tool in our toolbox" to fight the US tariffs.

The political impact could be as significant as the economic one. The two countries traded USD 880 billion in goods and services last year. Nearly 72 per cent of Canada's goods exports went to the United States. The two sides have argued for decades over issues such as Canadian softwood lumber and US access to Canada's protected dairy market, but they remained close allies. Canadian soldiers fought alongside Americans in Afghanistan after 9/11, the 5,525-mile border is undefended, nearly 330,000 people and USD 2 billion worth of goods cross it every day, and about 800,000 Canadians live in the United States.

Trump's approach has marked a major break from that traditional relationship. He has used tariffs to try to bring manufacturing back to the United States and has also made inflammatory remarks about making Canada America's 51st state. Carney said Canada had recognised that "America has changed" and that the two countries would "not return to our old relationship". In Canada, frustration has grown, with a petition seeking the expulsion of US Ambassador Pete Hoekstra gathering nearly 248,000 signatures since July 21. It accuses him of having "normalised" Trump's talk of annexing Canada, among other things. In the United States too, there is pressure because new tariffs are paid by importers and can feed into higher prices at a time when voters are already upset over the cost of living. Ryan Majerus, a partner at King & Spalding and a former US trade official, said: "Canada likely wanted further sector-specific relief than the US was willing to offer, or Canada's concessions did not go far enough. Either way, I think both sides will be under immense pressure in the coming days to still find an off-ramp. But if Canada has agreed to also impose tariffs, the off-ramp may be even harder to find." Candace Laing of the Canadian Chamber of Commerce called the tariffs "a body blow to North American competitiveness" and said they would raise costs for Americans while hurting Canadian customers, investment and small businesses.

Trump has made tariffs central to his second-term economic agenda. After the Supreme Court ruled in February that he had exceeded his authority by imposing broad import taxes last year, he turned to other legal powers. In Canada's case, he invoked Section 338 of the Tariff Act of 1930, a provision that has never before been used to impose tariffs and allows duties of up to 50 per cent on imports from countries seen as discriminating against US businesses. The move also comes as the United States, Mexico and Canada are trying to renew the US-Mexico-Canada Agreement, which Trump negotiated in his first term. Formal talks with Mexico have begun, but talks with Canada have not, and the worsening trade fight has cast doubt on whether they will start soon.

For now, the two neighbours remain locked in a dispute that has disrupted talks, triggered new tariffs and deepened mistrust. With both sides standing by their positions and no further negotiations planned, the trade fight threatens to affect businesses, consumers and the wider North American trade relationship.

With PTI Inputs

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