Canada’s retaliatory tariffs on U.S. goods took effect shortly after midnight Tuesday, as Prime Minister Mark Carney increased economic pressure on the country’s largest trading partner following the collapse of negotiations last month.
The move intensifies an 18-month-old trade dispute between the two neighbours.
The counter-tariffs cover about $20 billion worth of U.S. goods, with duties ranging from 15% to 50% on products including steel, furniture, clothing and electronics.
The dollar-for-dollar response marks a further escalation, with officials on both sides blaming each other for the breakdown of talks that had appeared close to a deal two weeks earlier.
The dispute is also raising concerns about the future of the U.S.-Mexico-Canada free trade agreement (USMCA), which faces annual reviews after U.S. President Donald Trump declined to extend the pact for another decade.
“What we are worried about is an escalatory spiral,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Carney’s advisory committee on bilateral U.S. economic relations. “But at the same time, we totally understand that the prime minister needs to find areas of leverage,” Harvey said.
Pressure on Canadian Industries
Trump’s tariffs introduced last month targeted several Canadian sectors, including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment. The measures cover approximately $20 billion, or 5%, of Canadian exports to the U.S.
Canada remains heavily dependent on the U.S. market, with almost 68% of its exports going south of the border this year. Roughly 80% of those exports have moved duty-free under the USMCA, providing some protection for the Canadian economy.
However, the latest U.S. tariffs, imposed under a Depression-era law, do not permit Ottawa to rely on those USMCA exemptions.
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The uncertainty surrounding the trade agreement has raised concerns about investment and economic growth, particularly as Canada confronts an economy roughly 13 times its size.
While Carney continues to enjoy broad public support, political analysts warn that prolonged economic disruption could weaken that support.
Public opinion in the United States also appears divided, with only 20% of Americans approving of Trump’s tariffs on Canadian goods, according to a Reuters/Ipsos poll.
Carney said last week that Canada remained prepared to negotiate a trade agreement that benefits both countries. However, Trump has also threatened to raise U.S. tariffs on Canadian cars, trucks and automotive parts to 50% from January 1.
For now, formal discussions appear to have stalled. A Canadian government source said there are currently no talks between ministers or government officials from the two countries.
“The Canadian government needs to keep channels open to the United States and not go overboard in terms of rhetoric and reacting to the rhetoric from the American side, while waiting for the American decision-making process to come back to economics,” Harvey said.
Reuters
