Canadian Prime Minister Mark Carney has announced that Canada will impose reciprocal tariffs on United States goods “dollar for dollar” after trade negotiations between the two countries collapsed shortly before a new wave of US tariffs on Canadian imports took effect.
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The fresh US tariffs came into force on Saturday after both sides failed to reach an agreement before the Friday night deadline, despite days of intensive negotiations and earlier indications that a deal was close.
Announcing the suspension of the talks, Carney said Canada had made important progress during negotiations but that the final terms proposed by Washington did not sufficiently protect Canadian interests.
“Last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal,” Carney said.
“As a result, this evening, I have decided to suspend trade negotiations with the US and have directed negotiators to return to Ottawa.”
He said Canada would respond to the new US measures with tariffs of equivalent value, signalling a significant escalation in the trade confrontation between two of the world’s most closely integrated economies.
The breakdown came after US President Donald Trump had threatened to impose a 50 per cent tariff on nearly $20 billion worth of Canadian imports.
Trump had temporarily paused the implementation of the tariffs earlier in the week, saying Washington and Ottawa were close to concluding a trade agreement that would be beneficial to both countries.
However, the negotiations unravelled shortly before the deadline.
Carney acknowledged that “important progress” had been achieved but said it was “not enough to meet our objectives for Canadians.”
Responding to Canada’s decision, United States Trade Representative Jamieson Greer accused Ottawa of backing away from terms Washington believed had already been agreed.
“Tonight, Canada declined to finalise the trade deal under the terms agreed earlier this week,” Greer said.
He added that despite an American offer that would have given Canada what he described as the best treatment available to any major exporter to the US market, new Canadian demands and the withdrawal of earlier commitments had disrupted the balance reached during negotiations.
The collapse represents a sharp reversal from the optimism expressed by officials from both countries earlier in the week.
Negotiators had reportedly been discussing an arrangement under which US tariffs on Canadian steel and aluminium would fall from 50 per cent to 25 per cent, while tariffs on Canadian automobiles would be reduced from 25 per cent to 15 per cent.
As part of the negotiations, Carney had also reportedly asked Canadian provinces to restore American alcoholic beverages to store shelves after several provinces removed US products in retaliation for earlier tariffs.
With the talks suspended, Canada is now subject to new 50 per cent US tariffs imposed under the Tariff Act of 1930.
The tariffs apply to a range of Canadian products, including wine, dairy products, cement, clothing and hockey equipment, representing about five per cent of Canadian exports.
They come on top of existing US tariffs affecting Canadian steel and aluminium, automobiles and lumber.
The development has pushed the US-Canada economic relationship into deeper uncertainty.
Canada sends approximately 70 per cent of its exports to the United States, making the American market critical to Canadian businesses and employment.
Trade tensions between the neighbours have intensified since Trump returned to office and introduced a broad tariff programme affecting several trading partners.
Businesses on both sides of the border had urged their governments to reach an agreement, warning that an escalating tariff war would increase costs, disrupt supply chains and threaten jobs.
The Canadian Chamber of Commerce described the new tariffs as “a body blow to North American competitiveness.”
Its president, Candace Laing, warned that smaller Canadian exporters operating on narrow margins could be forced to reconsider their orders, payrolls and staffing levels.
“For a small Canadian exporter operating on tight margins, this isn’t an abstract trade dispute. It means looking at your orders, your payroll and your employees and asking what you can still afford,” she said.
Economic projections have also raised concerns about the potential impact of the dispute.
An analysis by Calgary-based economist Trevor Tombe estimated that Canada could lose as many as 90,000 jobs if the new tariffs remain in place.
Financial analysts have also projected that the 50 per cent tariffs could reduce Canadian gross domestic product by between 0.3 and 0.6 per cent.
Despite the potential economic cost, Carney has received support from some provincial leaders for taking a tougher position against Washington.
Ontario Premier Doug Ford, whose province has a large automobile and manufacturing industry, said he fully backed a strong Canadian response.
“The prime minister has my full support for a strong response — tariff for tariff, dollar for dollar,” Ford said.
Ontario has been among the provinces most exposed to the trade confrontation because of its close integration with the US automobile and manufacturing industries.
Quebec and British Columbia are also expected to face significant economic pressure.
British Columbia Premier David Eby said Canada’s traditionally cordial approach should not be interpreted as weakness.
“Our politeness should never be mistaken for weakness,” Eby said.
“We didn’t ask for this, but we’ll keep fighting for as long as it takes.”
The United States and Canada have engaged in intermittent trade negotiations for more than a year as Ottawa sought the removal or reduction of American tariffs on several critical sectors.
Washington, meanwhile, has sought concessions from Canada, including the removal of remaining retaliatory tariffs on US automobiles and changes to Canadian dairy quotas to give American cheese producers greater market access.
The United States has also pressed Canadian provinces to lift restrictions on the sale of American alcoholic beverages introduced in retaliation for earlier US trade measures.
The Distilled Spirits Council of the United States blamed the continuing provincial restrictions partly for the failure to reach an agreement.
It said exports of American spirits to Canada had fallen by more than 70 per cent year-on-year following the introduction of retaliatory restrictions.
The dispute now presents one of the most significant economic tests of Carney’s premiership, as his government attempts to balance the economic consequences of a prolonged tariff battle with growing domestic pressure to resist terms it considers unfavourable.
With negotiations suspended and retaliatory measures expected, the two countries now face the prospect of a deeper trade confrontation unless diplomatic efforts succeed in bringing both sides back to the negotiating table.
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