US-Canada trade talks collapse as new 50% tariffs go into effect
Over two weeks of trade talks between the US and Canada collapsed late Friday with the Trump administration moving forward on 50% tariffs on an array of Canadian goods and Canada saying it would match the new duties “dollar for dollar.”
It was a sharp and sudden negative turn in the talks just hours after President Trump told reporters late Friday afternoon that negotiators had “pretty much” struck a deal, even as the talks continued to labor over a series of complex issues.
What it means for now is that Trump has moved forward with new tariffs on a range of Canadian goods in response to what the US claims are discriminatory trade practices around automobiles, alcohol, and dairy products.
The new tariffs will impose 50% duties and are set to impact about $28 billion worth of goods exported from Canada, from wine to hockey sticks to cement, and cover about 5% of what Canada exported to the US last year.
“Despite the US offer to Canada to receive the best treatment of any major exporter to our market,” Trump’s trade team claimed early Saturday morning, “new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days.”
Canadian Prime Minister Mark Carney offered in response that trade talks had been suspended as the US offer had “not been enough to meet our objectives as Canadians” and that it was the US that had asked for last-minute changes.
And on the subject of the new duties from the US, Carney promised that “Canada will match those tariffs dollar for dollar to protect our workers and businesses.”
The rapid fire collapse in talks appeared to set the stage for a new level of trade war between the US and Canada in the months ahead in duties that the Canadian Chamber of Commerce had previously warned “would damage both economies, drive up costs for U.S. families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on trade under the U.S.-Mexico-Canada Trade Agreement.”
The full collapse in talks followed a three-day pause announced earlier this week, and the teams met Thursday and Friday at the offices of the US Trade Representative in Washington, D.C., with both sides suggesting a deal was within reach.
Dominic LeBlanc, a top Canadian negotiator, had told reporters on Thursday, “We’re very close, we continue to make progress,” as significant tariff relief appeared to be in the offing with both sides pushing for a wide-ranging deal that would have spanned sectors from automobiles to metals to farm goods, but now appears off the table.
The upcoming tariffs could have significant economic implications for the US and Canada, as they are the largest recipients of each other’s exports, with the US accounting for roughly 62% of Canada’s trade.
The talks appeared to upend even areas that seemed like an easy win as late as Friday: liquor. Prime Minister Mark Carney had already pushed his provincial governments this week to end a boycott of US wine and spirits in government-owned liquor stores.
Now that the boycott could remain, the US has instead imposed new duties on Canadian spirits heading to the US.
Chris Swonger, the president of the Distilled Spirits Council of the United States, offered in a statement Saturday that American distillers have been unfairly targeted but that this was an unfortunate outcome likely to continue “significant economic harm to our industry.”
Read more: 5 ways to tariff-proof your finances
A collapse that takes a range of concessions off the table
Key sticking points in the talks centered on auto tariffs and the Canadian steel, aluminum, and lumber industries, which Trump hit with tariffs of up to 50% last year.
On autos and auto parts, the 25% tariffs Trump imposed last year were reportedly set to be lowered to 15% in the final deal, providing relief to auto companies that have built production processes that rely on parts crossing the US-Canada border multiple times to make a finished car.
But the issue remained a problem until the very end, as there were some questions around whether 15% is low enough for an embattled Canadian auto industry that could face existential stakes if auto companies decide tariffs are too high and simply shift more vehicle production to the US.
Read more: What Trump’s tariffs mean for the economy and your wallet
Negotiators had also appeared to be making progress on metal tariffs up until the last minute.
Wab Kinew, the Premier of Manitoba, had said earlier this week that tariff exemptions for at least some Canadian steel under the United States-Mexico-Canada Agreement (USMCA) trade pact could be restored, while Trump had discussed bringing the duties down to 25%.
Now the duties appear set to remain at the 50% levels that Trump imposed last year as the Trump team said it had offered “significant tariff reductions on steel, aluminum, autos, and lumber.”
Steel tariffs on other trading partners are generally at 25% on other countries, and the Trump team’s consideration of the move has already generated some pushback in the US.
A statement Friday from the Coalition for a Prosperous America, which represents US steel mills and other metal producers, expressed worry about the concessions.
“National security tariffs on critical sectors are not pawns for negotiation,” the group said.
Trump’s team had focused in the talks on improving market access for American farmers.
“We have to take care of our farmers. The farmers are very important to me,” the president said Friday.
His team has said the final deal would include a reduction in Canadian digital services taxes, which have been an irritant to US tech giants but an important source of revenue for Canada.
The deal is also expected to restart the Keystone XL pipeline, which was halted by former President Joe Biden.
Trump posted a meme multiple times this past week that portrayed him restoring the pipeline that was “buried by Biden.”
This story has been updated with additional developments.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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