WASHINGTON, Aug 22: The United States has imposed 50 per cent tariffs on around USD 20 billion worth of Canadian products after last-minute negotiations between the two countries failed to produce an agreement, prompting Ottawa to prepare dollar for dollar countermeasures from September 8.
The new American duties affect products including hockey sticks, medical items, steel related goods and other Canadian exports. The measures cover roughly 5 per cent of Canada’s annual shipments to the US, marking another escalation in a rapidly deteriorating trade relationship.
Canadian Prime Minister Mark Carney said Ottawa would announce details of its response in the coming days, with the new measures scheduled to take effect on September 8. The proposed retaliation will cover sectors including steel, dairy, appliances, agricultural machinery, pulp and paper and electronics.
Carney said Canada had offered to remove its remaining retaliatory duties on US steel, aluminium and automobiles if Washington significantly reduced its own tariffs. Ottawa had also been prepared to encourage Canadian provinces to resume sales of American alcoholic beverages.
However, he said Washington’s final demands were unacceptable.
“They asked too much and offered too little,” Carney said, explaining that the US proposals included conditions affecting Canadian vehicle exports, future trade agreements and protections related to language, culture and national sovereignty.
Washington defends new trade measures
US Trade Representative Jamieson Greer defended the administration’s decision, saying Washington had offered tariff reductions on products important to Canada, including steel, automobiles and lumber.
Greer said the United States was moving ahead with measures aimed at responding to Canadian retaliation, arguing that the administration’s priority was protecting American workers and domestic supply chains.
The two governments currently have no further negotiations scheduled, raising concerns about whether the dispute could expand into a broader confrontation.
The breakdown came only two days after officials from both sides had indicated that a compromise appeared possible. US President Donald Trump had previously delayed implementation of the latest duties by three days to give negotiators additional time.
Longstanding trade relationship under pressure
The dispute represents a major shift in relations between two countries that have traditionally maintained close economic, political and security ties.
The United States and Canada exchanged about USD 880 billion in goods and services last year. Their economies are deeply integrated, with hundreds of thousands of people and billions of dollars in goods crossing the 5,525-mile border each day.
Canada sends nearly 72 per cent of its goods exports to the US, making access to the American market particularly important for Canadian businesses.
Ontario Premier Doug Ford has supported Ottawa’s proposed response, calling for a tariff-for-tariff approach and saying Canada should keep all options open.
Canadian Chamber of Commerce President and CEO Candace Laing described the new US duties as a serious setback for North American competitiveness. She warned that higher trade barriers could increase costs for American consumers while putting Canadian businesses, investment and jobs under pressure.
Trump administration turns to 1930 tariff law
Tariffs have become a central element of Trump’s economic strategy during his second term. The administration has increasingly relied on alternative legal authorities to impose import duties after the Supreme Court ruled that the president had exceeded his authority in using a previous mechanism for broad trade penalties.
For the Canadian measures, the administration invoked Section 338 of the Tariff Act of 1930, which allows the president to impose duties of up to 50 per cent on imports from countries deemed to have discriminated against American businesses.
The provision dates back to the Great Depression and has never previously been used to impose tariffs. The broader 1930 tariff legislation, commonly associated with the Smoot-Hawley Tariff, has long been criticised for restricting international trade during an economic crisis.
USMCA future faces fresh uncertainty
The latest confrontation could also complicate efforts to renew the United States-Mexico-Canada Agreement, the North American trade pact negotiated during Trump’s first term.
Washington has already begun formal discussions with Mexico on changes to the agreement, while negotiations with Canada have yet to start. The escalating tariff dispute could make those talks more difficult and raise questions about the future of the three-country trading framework.
Trade experts warned that both governments now face growing pressure to find a way to de-escalate the dispute. With Washington imposing new duties and Ottawa preparing its own response, however, the possibility of further economic measures has increased.
The latest developments signal a significant departure from the traditionally cooperative US-Canada relationship, with Carney acknowledging that relations between the two neighbours may not return to their previous form.