The United States imposed 50% tariffs on some Canadian goods on Saturday after the two longstanding allies failed to reach a trade agreement, with both sides accusing each other of derailing negotiations.
The tariffs, which took effect shortly after midnight (0400 GMT), target about $20 billion worth of Canadian goods, including products such as wooden ice hockey sticks that are rarely used anymore. The affected goods account for just over 5% of Canada’s exports to the United States, limiting the immediate economic impact on Canada’s economy.
However, the new duties have heightened tensions between U.S. President Donald Trump and Canadian Prime Minister Mark Carney and are expected to complicate broader negotiations over the renewal of the United States-Mexico-Canada free trade agreement.
Carney said Canada had suspended trade negotiations with Washington and would retaliate “dollar for dollar” against the new tariffs.
“I have decided to suspend trade negotiations with the U.S. and have directed Canada’s negotiators to return to Ottawa,” Carney said in a statement.
“They (negotiators) have worked hard, in good faith, to defend the interests of Canadians throughout these negotiations up until the very last minute,” he said. “However, last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal.”
Carney, the only person to have headed the central banks of two major economies, was elected last year after campaigning on promises to stand up to Trump. He remains broadly popular, while opinion polls show most Canadians oppose making concessions to the U.S. president.
Hours before the tariffs took effect, the two countries had appeared close to reaching an agreement. Sources said the proposed deal would have reduced tariffs on steel, aluminium and automobiles and potentially allowed American alcohol products to return to Canadian liquor stores.
“Tonight, Canada declined to finalise the trade deal under the terms agreed earlier this week,” U.S. Trade Representative Jamieson Greer said during a White House briefing.
“This is a missed opportunity for Canada to partner with the United States, which is the fastest-growing economy in the G7,” Greer said.
A senior Trump administration official said the U.S. proposal would have placed Canada in the best tariff position of any major exporter to the United States. However, the official said Ottawa sought further concessions, particularly on steel, aluminium, automobiles and softwood lumber.
No further negotiations have been scheduled as the United States moves ahead with implementing the new duties, the official said.
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Trump last month threatened to impose additional tariffs on a range of Canadian imports, including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment.
Trade experts have warned that the tariffs, which do not receive preferential treatment under the U.S.-Mexico-Canada free trade agreement, could expose already vulnerable Canadian sectors to severe economic damage, including job losses and business closures.
The latest decision followed three days of negotiations in Washington between Canada’s minister responsible for trade with the United States, Dominic LeBlanc, and Greer.
The new duties come on top of existing U.S. tariffs on Canadian steel, lumber and automobiles, sectors that have suffered significant setbacks over the past 18 months, although the economic impact has largely remained concentrated within those industries.
