Canada has imposed new Canada tariffs on US goods, escalating an 18-month trade dispute with its biggest trading partner after negotiations between the two countries broke down last month.
The retaliatory measures took effect shortly after midnight on Tuesday and cover about $20 billion worth of US products. Duties range from 15% to 50% on goods including steel, furniture, clothing and electronics.
The dollar-for-dollar response marks a significant escalation in tensions between the neighbouring countries. Officials in Ottawa and Washington have blamed each other for the collapse of negotiations over a deal that appeared close to completion two weeks ago.
The dispute has also raised fresh uncertainty over the future of the United States-Mexico-Canada Agreement (USMCA), which faces annual reviews after US President Donald Trump declined to extend the trade pact for another decade.
“We are worried about an escalatory spiral,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Prime Minister Carney’s advisory committee on bilateral US economic relations.
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Harvey said the Canadian government also needed to identify areas where it could exert economic pressure on Washington.
Trump’s tariffs introduced last month affected Canadian exports including wine, furniture, dairy products, cement, clothing, fishing equipment and hockey gear. The measures covered about $20 billion, or 5%, of Canada’s exports to the United States.
Government data from both countries shows that Canada has sent almost 68% of its total exports to the US this year. Around 80% of those shipments moved duty-free under USMCA exemptions, providing some protection for the Canadian economy.
However, the latest US tariffs were imposed under a Depression-era American law that does not allow Canada to rely on USMCA exemptions.
The uncertainty surrounding the trade agreement has raised concerns about investment and economic growth as Canada confronts an economy roughly 13 times larger than its own.
Political analysts have warned that Prime Minister Carney’s broad domestic support could weaken if the economic consequences of the trade dispute become more severe.
A Reuters/Ipsos poll found that only 20% of Americans supported Trump’s tariffs on Canadian goods.
Carney said last week that his government remained prepared to reach a trade agreement that benefits both countries. However, a Canadian government source said there were currently no negotiations between ministers or other government officials from the two sides.
Trump also threatened last month to increase US tariffs on Canadian cars, trucks and automotive parts to 50% from January 1. He has separately signed an executive order seeking to rename Lake Ontario as “Lake America”.
Harvey urged Ottawa to maintain communication with Washington and avoid escalating rhetoric while waiting for the US decision-making process to return to economic considerations.
