US hits Canada with 50% tariffs; Ottawa vows dollar-for-dollar retaliation

The United States has imposed 50 per cent tariffs on USD 20 billion worth of Canadian goods, and Canada has ordered matching retaliation. The collapse of last-minute talks has deepened a historic rift and clouded North American trade negotiations.

In Short

• Measures cover roughly 5 per cent of Canada's yearly shipments southward
• Products affected range from hockey sticks to medical tongue depressors
• Carney halted negotiations, recalled officials and promised support for businesses

The United States early on Saturday imposed 50 per cent tariffs on Canadian products worth USD 20 billion, and Canada immediately said it would retaliate after last-minute talks failed to ease the latest strain in ties between the two allies.

The tariffs will affect about 5 per cent of Canada’s yearly shipments to the US, covering products from hockey sticks to tongue depressors. The breakdown also raises questions over the future of the North American trade pact involving the US, Canada and Mexico.

Canadian Prime Minister Mark Carney said, "Canada will match those tariffs dollar for dollar to protect our workers and businesses." He added that his government would announce more support for Canadian workers and businesses in the coming days.

A senior Trump administration official told reporters that Canada had sought concessions on US tariffs on steel, aluminium, autos and lumber, but Washington was not willing to provide them.

US Trade Representative Jamieson Greer said, "Tonight, Canada declined to finalise the trade deal under the terms agreed earlier this week. Despite the US offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days." Greer also said the US offer was "forward-looking" and included "a historic economic and national security partnership".

Carney blamed Washington for the collapse of the talks, saying "last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal". He said he had suspended negotiations and ordered Canada’s negotiating team to return to Ottawa. He also said Canada’s aim throughout the talks had been to secure the best possible agreement, "never a deal at any price or on any deadline".

No further talks have been planned. The failure to reach a deal was a sharp change from just two days earlier, when officials on both sides had suggested they were moving towards a compromise. The tariffs were originally due to begin at 12.01 am on Wednesday, but US President Donald Trump extended the deadline by three days to allow the talks to continue.

The political effect could be larger than the economic impact. The two countries traded USD 880 billion worth of goods and services last year. For decades, they have argued over issues such as Canadian softwood lumber and US access to Canada’s protected dairy market, while remaining close allies and major trading partners. 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 handling of Canada marks a significant break from that traditionally cooperative relationship. He has imposed tariffs on Canadian goods in an effort to bring manufacturing back to the US and has repeatedly made comments 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".

Public frustration has grown in Canada. A petition calling for the expulsion of US ambassador Pete Hoekstra has gathered nearly 248,000 signatures since July 21, accusing him of having "normalised" Trump’s talk of annexing Canada, among other things.

Both sides had reasons to seek a compromise. Nearly 72 per cent of Canada’s goods exports last year went to the US. The Trump administration may also be cautious about a major new tariff ahead of November’s midterm elections, as US importers pay the duty and may pass on the cost through higher prices at a time when voters are already unhappy with 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, president and CEO of the Canadian Chamber of Commerce, called the tariffs "a body blow to North American competitiveness", saying they would raise costs for Americans while threatening Canadian customers, investment and small businesses.

Tariffs have been central to Trump’s second-term economic agenda. Last year, he imposed double-digit import taxes on almost every country, saying the long-running US trade deficit was a national emergency. In February, the Supreme Court ruled that he had exceeded his authority, struck down those tariffs and opened the way for refunds to importers.

For Canada, Trump turned to Section 338 of the Tariff Act of 1930, a provision from the Great Depression era, to threaten 50 per cent tariffs on goods accounting for about 5 per cent of Canadian exports to the US. The broader 1930 law, known as the Smoot-Hawley tariffs, is widely known for restricting global trade and worsening the Great Depression. Section 338 has never before been used to impose tariffs. It allows the president to levy import taxes of up to 50 per cent on imports from countries seen as discriminating against US businesses, without requiring an investigation or setting a time limit.

The dispute comes as the US, Mexico and Canada are trying to renew the trade agreement Trump negotiated in his first term. Washington has started formal talks with Mexico on revamping the US-Mexico-Canada Agreement, but talks with Canada have not begun, and the rising trade conflict has cast doubt on whether they will. Barry Appleton, senior fellow at the Centre for International Law at New York Law School, said, "Canada told the Americans in advance that if these tariffs landed, it would stop negotiating and retaliate. The American trade representative said publicly he would not tolerate retaliation. Both sides have now committed themselves in public, which is how escalation stops being a choice."

With the tariffs now in effect, Canada has suspended negotiations and announced matching retaliation, leaving trade ties between the two neighbours under fresh strain and the future of wider North American trade talks uncertain.

With PTI Inputs

- Ends