US hits Canada with 50% tariffs as trade war intensifies

U.S.-Canada trade talks fell apart just before a midnight deadline, with 50% tariffs hitting billions of dollars of Canadian goods and Prime Minister Mark Carney vowing to retaliate in a dispute that looks poised to intensify.

The U.S. import taxes kicked in Saturday on hundreds of items from Canada, such as plywood, liquor, electrical equipment and hockey gear, totaling around $20 billion. The Trump administration invoked a Depression-era authority for the first time to justify the move.

Carney said he suspended talks with Washington and that his government would match those duties “dollar for dollar to protect our workers and businesses.” If he does, U.S. officials are pledging to present President Donald Trump with options to escalate.

The two sides blamed each other for the collapse. U.S. Trade Representative Jamieson Greer said the Canadian negotiators made 11th-hour demands that upended a draft deal worked out over days of negotiations.

“Despite the U.S. 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 said in a statement.

Greer said in an interview with Fox News that the U.S. is “moving forward with measures that respond to Canadian retaliation,” but offered no details.

He also said no new discussions with Canada were currently scheduled.

Carney, meanwhile, argued that it was the U.S. that had changed its position, saying “last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal.”

It wasn’t immediately clear what American sectors Carney will target in his retaliation, nor how quickly the U.S. would take any additional steps in turn. But the late-hour posturing signaled the potential for a spiraling trade fight between two economies that have tightly integrated supply chains particularly in the auto, energy and agricultural industries.

“Canada and the United States build cars together — we’ve done it for more than a century,” former Canadian Deputy Prime Minister Chrystia Freeland told Bloomberg Television’s Wall Street Week With David Westin. “Imposing permanent tariffs on cars and car parts is really going to hurt Detroit.”

A U.S. official, speaking on condition of anonymity late Friday, said there were no new talks scheduled. The administration will provide Trump options to level out the playing field if Canada retaliates, the official said.

Rising tensions

The stalemate dials up the tension between two longtime allies that conducted almost $900 billion of trade in goods and services last year.

In addition to imposing tariffs, Trump has publicly mused about making Canada a U.S. state, referred to its prime ministers as “governor” and claimed the country couldn’t survive without the U.S.

Trump got ahead of himself on Tuesday night, when he announced less than two hours before the tariffs were originally set to take effect that the two sides had an agreement lacking just the “finalization of documents.” Canadian officials later said important elements still needed to be worked out.

The two sides had been discussing a deal that included lowering tariffs on certain Canadian steel and aluminum to 25%, cutting duties on Canadian autos to 15% and eliminating a 10% lumber tariff. The U.S. official said talks ended when Canada sought additional concessions in a couple of those areas, but declined to say which.

But the draft agreement was not without its critics. The U.S. steel and aluminum industry balked at the measures that would have weakened their standing. Carney faced blowback in Canada, too, for concessions he was prepared to make that would have, in effect, codified tariffs that Canada has long declared illegal, albeit at a lower level.

The trade fight raises a fresh challenge for Trump, who is facing slumping polls and a prolonged conflict with Iran as he barrels toward midterm elections in November.

A scrap with Canada — the U.S.’s No. 2 source of imports — threatens to fuel voters’ concerns with high prices and further cloud the path for the Federal Reserve as the administration looks to tame the bond market and bring down borrowing costs.

In his statement late Friday, Greer confirmed the deal would have reduced tariffs on automobiles, steel, aluminum and lumber, and see the two countries cooperate on export controls, digital trade and certain joint tariffs that he didn’t specify.

They would have also launched formal negotiations to renew the U.S.-Mexico-Canada Agreement, which Trump negotiated in his first term but declined to renew earlier this year, sending the pact into a decade of rolling reviews.

In exchange, Canada was prepared to remove retaliatory measures implemented last year after Trump launched the trade war, though the full scope of its potential concessions hasn’t been made public.

The White House had been seeking the elimination of Canada’s counter-tariffs on American-made vehicles and an end to the ban on the retail sale of U.S. alcoholic beverages in most provinces.

“While I’m hoping more will come out on what happened and where we go from here, this is deeply troubling for thousands of small Canadian exporters,” said Dan Kelly, head of the Canadian Federation of Independent Business.

The new 50% tariffs are being imposed under a never-before-used Section 338 provision of the Tariff Act of 1930 that gives the president the power to put duties on countries deemed to discriminate against U.S. commerce.

But the new levies won’t apply to the most important natural resources the U.S. imports from Canada, such as oil, potash and critical minerals. Canada is the U.S.’s most important foreign supplier of crude oil and petroleum products — more than 4 million barrels a day.

Public opinion polls in Canada show broad support for fighting back against Trump’s tariffs, and officials in Ottawa have been studying a series of options, according to people familiar with the matter.

‘Full support’

In a call with provincial premiers earlier this week, Carney said his government was prepared to retaliate with dollar-for-dollar tariffs if needed — but that he was pleased with the framework deal and relieved he didn’t have to take that step, which he said could be very damaging, according to a person with knowledge of the matter.

“The prime minister has my full support for a strong response — tariff for tariff, dollar for dollar,” Doug Ford, the premier of the province of Ontario, where Canada’s auto sector is based, said in a social media post early Saturday.

Carney earlier appeared to rule out curbing the supply of important natural resources to the U.S. “Being a reliable supplier is important,” he told reporters in late July, shortly after the Trump administration first threatened the 50% tariffs.

Canada will also soon announce “additional measures to support Canadian workers and businesses,” Carney said, without elaborating.

University of Calgary economist Trevor Tombe estimated if these tariffs remain in place, Canada could lose almost 90,000 jobs. The export hit impact is most sharply felt in machinery and electronics, plastics and rubber, furniture, wood, paper, and chemicals and cosmetics, he added. British Columbia, Ontario and Quebec would be the worst hit provinces, he said.