Canada's retaliatory tariffs on US goods took effect just after midnight on Tuesday, following the collapse of trade negotiations last month. Prime Minister Mark Carney has increased economic pressure on the United States, which is Canada's largest trading partner, intensifying an 18-month trade dispute.
The counter-tariffs cover $20 billion worth of US goods, with duties ranging from 15% to 50% on products including steel, furniture, clothing, and electronics. This dollar-for-dollar retaliation marks an escalation in the ongoing trade conflict, with officials from both countries exchanging blame for the failure to reach an agreement that appeared close just two weeks prior.
The heightened tensions raise concerns about the future of the US-Mexico-Canada Agreement (USMCA), which is subject to annual reviews after US President Donald Trump opted not to extend it for another decade.
Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Carney's advisory committee on bilateral US economic relations, expressed worries about an escalating spiral but acknowledged the need for the prime minister to find leverage.
Trump's tariffs, implemented last month, affected sectors such as wine, furniture, dairy products, cement, clothing, fishing rods, and hockey equipment, covering $20 billion or 5% of Canadian exports to the US. According to government data, Canada has exported nearly 68% of its total exports to the US this year, with approximately 80% moving duty-free due to USMCA exemptions. The new tariffs, imposed under a Depression-era US law, do not permit Ottawa to utilize these exemptions.
Concerns regarding the future of the USMCA have contributed to uncertainty surrounding investment and growth, as Canada engages in a trade conflict with an economy 13 times its size. Polls indicate that while Carney enjoys broad support from Canadians, this support may diminish as the impacts of the trade war become more apparent. A Reuters/Ipsos poll found that only 20% of Americans approved of Trump's tariffs on Canadian goods.
Carney stated last week that his government is prepared to sign a trade deal that benefits both countries. Trump has threatened to increase US tariffs on all cars, trucks, and automotive parts from Canada to 50% starting January 1, and has signed an executive order renaming Lake Ontario as Lake America. A government source indicated that there are currently no discussions between the two sides among ministers or government officials.
Harvey advised that the Canadian government should maintain open channels with the United States and avoid excessive rhetoric while awaiting a return to economic decision-making from the American side.