Why Trump is escalating his trade war with Canada — and what it means for you

Canada on Tuesday announced new retaliatory tariffs as high as 50% on more than 700 U.S. goods, including steel, clothing, appliances, tools and fish. The new measures, which go into effect on Sept. 8, come after trade talks between the two countries collapsed over the weekend, sparking a full-blown trade war. 

On Monday, two days after following through on an earlier tariff threat, President Trump threatened to increase tariffs on all cars, trucks, car parts and steel from Canada to 50% starting next year. Trump also said he’s “giving serious consideration to changing the name of Lake Ontario to Lake America.” 

Trump wrote Sunday on Truth Social that Canada was “among the worst Nations in the World to deal” with and warned that America’s northern neighbor “will be treated like a State no longer.”

“The U.S.A. will always be far bigger, richer, and stronger than Canada,” the president said in a subsequent post. “Someone should get these clowns to ‘fall in line’ or, the consequences for Canada will be far WORSE!”

Trump’s remarks — and Canada’s response — followed weeks of negotiations and frequent claims from Trump that a deal was close. Both sides announced late Friday that they had failed to come to terms. At midnight on Saturday, the Trump administration followed through on its earlier threat to impose new 50% tariffs on $20 billion of Canadian goods, including hockey sticks, plywood, men’s suits, wine, cement, honey, makeup, perfume, jewelry, furniture and cameras.

Canadian Prime Minister Mark Carney declared on Saturday that Canada was now “at war” with the U.S. over the tariffs, vowing a “dollar for dollar” response. 

“We learned from the U.S. team during negotiations that [Trump] wants to destroy our major industries,” Carney told reporters on Monday. “That’s one of the major reasons that led us to say ‘no.’ It was a bad deal.”

Can U.S.-Canada relations be repaired? If not, how will all of these new tariffs affect you? Trump has been trying to transform America’s alliance with one of its biggest trading partners since returning to office in January 2025. Here’s where things stand right now — and what could come next. 

Why talks fell apart

The U.S. and Canada have been conducting on-again, off-again trade talks since the start of Trump’s second term. The latest round began in late July after Trump threatened to impose new 50% import taxes in response to Canada’s retaliatory measures against his earlier waves of tariffs. The goal was to deescalate the dispute and reach some sort of lasting deal. 

As recently as last week, leaders from both countries were saying that a deal was effectively done. The full details of the proposed agreement were never released, but the broad framework would have included Trump dropping his threat to impose the new 50% tariffs in exchange for removing what the U.S. views as unfair barriers to trade — particularly when it comes to agriculture and energy. 

Another topic that was discussed was the revival of Keystone XL, a pipeline that was intended to carry large amounts of Canadian oil into the United States before the project was shuttered by former President Joe Biden. On Aug. 18, Trump posted on Truth Social that the U.S. and Canada had reached a deal and suggested that the pipeline could be “awoken from the grave.”

The deal fell apart, however, after Canadian leaders said that the U.S. was trying to assert more control over their country’s economy than it was willing to surrender. 

“Last minute changes in the U.S. proposed deal were unfair, uneconomic and called into question the reliability of any deal,” Carney wrote in a social media post Friday night in which he announced that he was formally suspending trade talks. 

One of the big sticking points, Carney said, was American demands that amounted to “threats on the French language,” which he said would “never be acceptable” in Canada’s bilingual economy. Trump denied that language issues were ever part of the trade talks, saying, “This lie was made up by a weak and ineffective Prime Minister.”

The breakdown of negotiations has sparked a renewed wave of threats and insults that appeared to be pushing the two countries even further apart. 

Carney said Monday that Canada won’t be returning to the negotiating table until he’s confident the U.S. will approach any new talks with “the right attitude” and won’t treat his country as a “subsidiary of the United States.” 

Doug Ford, the premier of the Canadian province of Ontario, was much less diplomatic. Standing in front of a sign that read “Protect Ontario” and flanked by construction workers on Monday, Ford urged Canada to inflict “massive pain” on the U.S. in retaliation for Trump’s tariffs. He also took personal shots at the president, calling him a “loser” and telling Trump to “kiss my ass.”

“He underestimates Canada. We’re all in,” Ford told the Associated Press. “Up here, we’re at a fever pitch, everyone’s in for an economic war.”

Trump attacked Ford in kind in a post on Truth Social Monday, calling him a “flunky” and describing him as a “less charismatic, intelligent, and overall unimpressive” alternative to his late brother Rob Ford — who was mayor of Toronto from 2010 to 2014.

U.S. Treasury Secretary Scott Bessent on Monday suggested Canada was refusing to “negotiate in good faith” throughout the trade talks. He also suggested that Carney’s choice to take a firm stance in trade talks was rooted more in his own political interests than the economic interests of the Canadian people. 

“Unfortunately, Prime Minister Carney rose to power on an anti-American, anti-Trump platform. … He seems to have gone back to his old playbook,” Bessent said. 

Bessent’s Canadian counterpart, Finance Minister François-Philippe Champagne, told reporters Monday that his country can only tolerate so much from the U.S. before it is forced to punch back.

“At some stage you have to say enough is enough,” he said. “We stood up for our economic sovereignty. … We’re gonna be the master of our own destiny.”

How the U.S.-Canada trade war could affect you

On Monday, U.S. Trade Representative Jamieson Greer told CNBC that “there’s no possible way” new tariffs “can really affect U.S. well-being.”

But economists note that a tariff is an import tax paid by the company doing the importing — not by the foreign country (or foreign business) sending its goods to the U.S. The same experts have found that importers often pass at least some of the added cost of tariffs on to U.S. consumers through higher prices, rather than replacing the affected goods with American-made alternatives.

So it stands to reason that Trump’s new 50% tariff on certain Canadian goods — hockey sticks, plywood, men’s suits and so on — could make those products more expensive for Americans. 

At the same time, U.S. businesses can suffer if they have to pay more for imported Canadian parts or raw materials, or if their products suddenly cost more in Canada because of retaliatory tariffs. Already, U.S. automakers have cut back production north of the border because of tariffs on steel and auto parts, which also raise repair and insurance costs. Meanwhile, Trump has complained that Canadian imports of American alcohol and cars have plummeted since last spring. 

Canada’s new retaliatory tariffs could have a similar effect on U.S. steel, clothing, fish, tools, appliances and other affected items. 

On Monday, Ford also threatened to cut off electricity and critical minerals from Ontario. The Pentagon increasingly relies on the latter for use in military aircraft, missiles, munitions and electronics. (For geopolitical reasons, it is always seeking sources other than China.) As for electricity, Ontario imposed a 25% surcharge on power exported to Michigan, Minnesota and New York during an earlier phase of the U.S.-Canada dispute — then retreated when Trump threatened to double steel and aluminum tariffs. 

But this time around, Ford insisted that “everything’s on the table.” 

“We power 1.5 million [U.S.] homes and businesses,” he said. “I’ll do whatever it takes.”

What’s behind Trump’s feud with Canada? 

For the last 150 years, U.S. presidents have largely maintained close, cordial relations with America’s “nicer” neighbors to the north. Trump, in contrast, spent the first weeks of his second term threatening to turn Canada into “the 51st state” and publicly referring to the country’s then-prime minister and Liberal Party leader, Justin Trudeau, as “Governor” Trudeau.

In February 2025, Trump imposed sweeping 25% tariffs on goods from both Canada and Mexico. He later increased the tariff on many Canadian exports to 35% while imposing individual tariffs on steel, auto parts and other major industries. 

Some have speculated that Trump’s animosity toward Canada is rooted in his troubled business dealings there, including a Toronto hotel and condominium complex that went into receivership in 2016 and a Vancouver hotel that filed for bankruptcy and closed in 2020. Others have noted Trump’s fractious relationship with the progressive Trudeau, 54, who was famously photographed greeting first lady Melania Trump with a European cheek kiss at a 2019 Group of 7 gathering in France. A few months later, Trump called his Canadian counterpart “two-faced” for appearing to mock him at a meeting of NATO leaders. The previous year, Trump accused Trudeau of being “very dishonest and weak.”

But the simpler explanation for Trump’s aggressive trade stance is that the president might see Canada less as the United States’ closest ally and more as yet another country that, in his view, has been freeloading and ripping America off — and he’s determined to leverage Washington’s vast economic power over Ottawa to renegotiate any existing deals on more favorable “America First” terms.

“It’s not fair for us to be supporting Canada,” Trump said at a Cabinet meeting in February 2025. “If we don’t support them, they don’t subsist as a nation.”

This is not a new theme for Trump. During his first term, he railed against the steep tariffs Canada imposes on U.S. dairy imports to protect its own domestic farmers, calling them a “disgrace.” In 2018, he slapped 25% tariffs on Canadian steel and 10% tariffs on Canadian aluminum — a move that resulted in at least 75,000 job losses across the U.S. manufacturing sector by mid-2019, according to economists.

Likewise, Trump has long complained that the modest U.S. trade deficit with Canada amounts to a “subsidy,” even though experts say it mostly exists because the U.S. imports a lot of inexpensive Canadian oil, which helps lower Americans’ gas prices. And Trump also disapproved of Canada spending less than 2% of its GDP on defense — a gripe he had with European NATO member nations as well. (Canada and others have since stepped up their spending.) 

As a result, Trump has spent much of his second term escalating the economic pressure on Canada — imposing tariffs; stacking those tariffs with additional duties on steel and aluminum; picking a trade fight over Canadian lumber; withdrawing from earlier trade talks over a “fake” Ronald Reagan ad — in an apparent effort to use the United States’ economic leverage over Canada to secure more favorable terms at the negotiating table.

Now, that campaign seems to have ruptured U.S.-Canada relations. Canadian sentiment toward the U.S. soured as soon as Trump started his “51st state” insults, according to the New York Times, with some Canadians boycotting American goods and canceling their U.S. vacations. The Canadian government imposed retaliatory tariffs on billions of dollars of American exports; some provinces went so far as to pull certain U.S. products from their shelves. Trudeau’s Liberal Party, which had been suffering in the polls, rebounded ahead of Carney taking over as prime minister in March and won last April’s federal election. Since then, Carney has repeatedly said that Canada’s old relationship with America is over.