Trump escalates trade war against Canada with threat to impose 50% tariffs

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U.S. President Donald Trump is escalating his trade war against Canada, imposing 50-per-cent tariffs on a range of goods to hit back at Ottawa for retaliating against his previous tariffs.

In a surprise move on Monday, Mr. Trump signed three proclamations invoking Section 338 of the Depression-era Tariff Act, which has never previously been used, to impose the levies on Canada in response to the country curbing imports of U.S. autos, alcohol and dairy.

In addition to tariffing Canadian alcohol and dairy products, the President’s new levies will also hit a grab bag of hundreds of other goods, ranging from hockey sticks to cement to electronic equipment to Christmas ornaments.

The tariffs take effect on Aug. 19 and will not include an exemption for goods trading under the U.S.-Mexico-Canada Agreement, broadening the economic damage Mr. Trump has been trying to inflict on one of his country’s closest allies since he returned to office last year.

U.S. Trade Representative Jamieson Greer’s office said the tariffs would apply to nearly US$20-billion worth of Canadian goods, roughly five per cent of the country’s exports to the U.S.

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In a statement, the White House complained that Canada has fought back against Mr. Trump’s trade war. Other countries and trading blocs, including the United Kingdom, Japan and the European Union, agreed to accept punitive U.S. trade measures in exchange for Mr. Trump not making their tariffs even higher.

“Over the past year and a half, only two countries have chosen to retaliate against President Trump’s tariffs rather than negotiate a deal with the United States: the People’s Republic of China and Canada,” the statement said.

The new tariffs will not apply to Canadian oil, gas, potash, fish or critical minerals, even though oil and gas is the main source of the U.S.’s trade deficit with Canada, which Mr. Trump has said he wants to eliminate.

“This is the latest in a series of unilateral U.S. trade actions that began with the U.S. imposing a series of tariffs in direct violation of” the USMCA, Prime Minister Mark Carney said in a statement Monday evening. “Canada, as is its right, has merely matched those measures.”

Mr. Carney said Canada has already made “detailed and comprehensive proposals” to end the trade war and is “ready to intensify” talks with the U.S.

The President last year imposed hefty tariffs on steel, aluminum and autos, which disproportionately hit Canada because of the two countries’ integrated economies. Canada is also subject to Mr. Trump’s global baseline tariff, but, until now, most goods were exempted so long as they complied with the USMCA.

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Of particular irritation to the Trump administration have been the provinces that have taken U.S. alcohol off store shelves in response to the tariffs. One of Mr. Trump’s orders Monday hits back by tariffing Canadian beer, wine, whisky and numerous other alcoholic products, including prune wine and sake. Imported cocktail ingredients, such as bitters, will also be subject to the levy.

The order says that Canadian imports of U.S. alcohol dropped by 81 per cent since the bans took effect.

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Another order targets milk, whey and lactose in response to Canada’s supply management system, which limits dairy imports from the U.S. and other countries. In the order, the Trump administration complains that Canada allows in more dairy under its Comprehensive Economic and Trade Agreement with the European Union than it does under the USMCA, which Mr. Trump negotiated during his first term.

In response to Canada’s retaliation against U.S. auto tariffs – which the Trump administration says caused a 22 per cent drop in U.S. auto exports to Canada – the U.S. will not further hike auto tariffs, but will instead hit a list of other products. These include honey, down for stuffing pillows, bedsheets, horsehair, flowers, chandeliers, fake beards, cameras, and “mosses and lichens.”

Mr. Carney tried last year to negotiate down Mr. Trump’s tariffs. He also made several concessions, including cancelling a planned digital services tax, reducing retaliatory tariffs, and complying with the President’s demands for stepped–up military spending and border security.

But Mr. Trump abruptly ended talks in October after Ontario aired an anti-tariff ad in the U.S. that featured former president Ronald Reagan. The two sides began talking again this spring but there have been few signs of progress.

Earlier this month, the U.S. opted not to renew the USMCA, triggering a period of annual reviews set to last a decade. The U.S. has started talks with Mexico to review the deal but has so far not negotiated with Canada.

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Last week, the President seized on smoke from Canadian wildfires as another reason to impose tariffs. On Sunday, he told reporters that he had confronted Mr. Carney on the issue of air quality while they attended the World Cup final in New Jersey together.

“Maybe they should pay us some damages or something or we should do some tariffs,” he said.

Brian Clow, former prime minister Justin Trudeau’s advisor on U.S. relations during the USMCA negotiations, said Mr. Trump’s new tariffs are “a big escalation.”

“When a country produces such a list … you are doing it to maximize the economic and political pain in the country you are targeting,” he said in an interview.

The objective may be to squeeze concessions out of Canada on broader trade issues related to the USMCA. But it may also be that Mr. Trump has no interest in a new deal and has dedicated himself to the destruction of Canadian industrial sectors, such as the manufacturing of steel and cars.

Things “could definitely get a lot worse,” Mr. Clow said. “This is not necessarily the bottom.”

Lachlan Wolfers, global head of indirect taxes at KPMG International, said the staying power of the Tariff Act authority Mr. Trump is using to impose the tariffs is legally untested, as it has not previously been invoked. Several other powers Mr. Trump previously used to impose tariffs have since been deemed illegal by the U.S. Supreme Court.

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Mr. Trump’s aim could be to press Canada into signing a trade deal like the ones Britain and the EU agreed to, which Ottawa has so far resisted doing as it would mean explicitly agreeing to measures favouring the U.S.

“This basically follows a very familiar pattern of the U.S. administration,” Mr. Wolfers said in an interview. “You set a clock ticking of 30 days, which is the strategy that is often deployed here. Create urgency as a means to try and get to a resolution.”

Mr. Trump is expected to announce additional tariffs on a raft of other countries this week, following a probe into whether those nations import goods made by forced labour. Mr. Trump has been looking for legal ways to reimpose tariffs that were struck down earlier in the year by the Supreme Court.

Since returning to office last year, Mr. Trump has cited a long range of reasons – from fentanyl imports to the U.S. to national security to forced labour – as he looks for legal authorities to tariff nearly every country in the world.

California winemakers cheered Mr. Trump’s tariff announcement, saying that they have suffered a US$357-million drop in exports to Canada since 2024. In a statement, Steve Gross, president of the Sacramento-based Wine Institute, blamed provincial actions for causing “significant harm on both sides of the border.”

Some Canadian premiers, meanwhile, struck a note of defiance.

Ontario Premier Doug Ford urged retaliation. “If these tariffs proceed, Canada should respond tariff for tariff, dollar for dollar,” he wrote on social media.

Quebec Premier Christine Fréchette posted on social media that “any weakening of supply management is non-negotiable,” and said her government would defend the system “without compromise.”

British Columbia Premier David Eby needled Mr. Trump on the cost of living in the U.S., an issue that has been clobbering his poll numbers ahead of congressional elections this fall.

“Mostly, it’s going to increase costs for Americans when they can least afford it,” Mr. Eby told reporters of the tariffs. “At this point, I just feel sorry for Americans. If you’re picking fights with Canadians, then you don’t have a friend in the world.”

With reports from Jason Kirby and Laura Stone in Toronto, Maura Forrest in Montreal and Matthew Scace in Calgary