Canada Will Impose Retaliatory Tariffs On U.S. Goods As Trade Talks Collapse

WASHINGTON (AP) — The United States has imposed a 50% tariff on $20 billion worth of Canadian products as of early Saturday. In response, Canada announced plans for retaliation starting September 8, following unsuccessful negotiations aimed at resolving the latest strain in relations between the historic allies.

President Donald Trump’s tariffs target around 5% of the annual goods Canada ships to the United States, which includes items like hockey sticks and tongue depressors.

Mark Carney, speaking from Ottawa on Saturday, stated that the specifics of these new tariff measures would be revealed shortly and would take effect the Tuesday following Labor Day. The Canadian countermeasures would match the U.S. tariffs dollar-for-dollar, targeting sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Carney further revealed that Canada was prepared to remove retaliatory tariffs on steel, aluminum, and autos if the U.S. made significant reductions in its own tariffs, and encouraged provinces to reinstate U.S. alcohol sales.

However, he accused Washington of making excessive demands, stating, “They asked too much and offered too little.”

This retaliation raises doubts about the future of the North American trade agreement, which is vital for industries in the United States, Canada, and Mexico.

Canada had been seeking concessions on tariffs involving steel, aluminum, autos, and lumber.

“Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days,” U.S. Trade Representative Jamieson Greer said in a statement read to reporters shortly before midnight.

Carney held the Republican administration responsible for the breakdown, criticizing the last-minute changes in the U.S. proposed terms as “unfair, uneconomic, and called into question the reliability of any deal.”

Carney mentioned that his government would soon announce additional support for Canadian workers and businesses.

Greer described the U.S. proposal as “forward-looking” and highlighted a “historic economic and national security partnership.”

No further negotiations are planned.

The collapse in discussions represented a stark shift from two days earlier when both sides appeared to be nearing a compromise.

Carney stated that Canada aimed to secure the best possible agreement throughout the negotiations, focusing on “never a deal at any price or on any deadline.”

Ontario Premier Doug Ford, leading Canada’s most populous province, expressed his full support for Carney’s approach, advocating for tit-for-tat retaliation and suggesting that “everything needs to be on the table.”

The political consequences could overshadow the economic impact. The two countries exchanged $880 billion in goods and services last year.

The tariffs were initially set to take effect at 12:01 a.m. Wednesday, but Trump extended the deadline by three days to allow for more negotiations, which ultimately failed to yield an agreement.

The U.S. and Canada have a long history of trade disputes, often clashing over issues like Canadian softwood lumber imports and U.S. access to Canada’s protected dairy market.

Despite these disputes, the two nations have maintained a strong alliance. Canadian troops supported American forces in Afghanistan post-9/11. The 5,525-mile U.S.-Canada border remains undefended, with nearly 330,000 people and $2 billion worth of goods crossing it daily; 800,000 Canadians reside in the United States.

Trump’s handling of Canadian relations marks a significant shift from the historically cooperative dynamic between the two countries. He has imposed tariffs on Canadian imports to revive U.S. manufacturing and has made provocative remarks about turning Canada into America’s 51st state.

Carney acknowledged that Canada has realized “America has changed” and that a return to the previous relationship is unlikely.

Public frustration in Canada is growing. A petition calling for the expulsion of U.S. Ambassador Pete Hoekstra, an ally of Trump, has gathered nearly 248,000 signatures since July 21. The petition accuses him of “normalizing’’ Trump’s annexation rhetoric.

There are clear incentives for both countries to reach a compromise.

Nearly 72% of Canada’s goods exports last year were to the United States. The Trump administration might hesitate to introduce new tariffs—which U.S. importers pay and often pass on to consumers—before the November midterm elections. American voters are already discontent with the high cost of living.

“Canada likely wanted further sector-specific relief than the U.S. was willing to offer, or Canada’s concessions did not go far enough,’’ said Ryan Majerus, a partner at King & Spalding and a former U.S. trade official. “Either way, I think both sides will be under immense pressure in the coming days to still find an off-ramp. But if Canada has agreed to also impose tariffs, the off-ramp may be even harder to find.”

Candace Laing, president and CEO of the Canadian Chamber of Commerce, described the tariffs as “a body blow to North American competitiveness,” warning that they would increase costs for American consumers while threatening Canadian customers, investments, and small businesses.

Tariffs have become a central element of Trump’s second-term economic policy. Last year, he imposed double-digit import taxes on nearly all countries, citing the persistent U.S. trade deficit as a national emergency. The Supreme Court ruled in February that he had exceeded his authority, overturning the penalties and paving the way for the federal government to pay refunds to importers.

Trump has since sought alternative legal grounds to justify tariffs.

To penalize Canada, he invoked Section 338 of the Tariff Act of 1930, threatening 50% tariffs on products covering approximately 5% of Canadian exports to the United States.

During the Great Depression, Congress enacted the 1930 tariff law, imposing global import taxes. Known as the Smoot-Hawley tariffs, these measures are infamous for restricting global trade and exacerbating the Depression.

Section 338, never before used to impose tariffs, allows the president to impose import taxes of up to 50% on goods from nations discriminating against U.S. businesses. There is no requirement for investigation or a limit on the duration of these tariffs.

This rift emerges as the United States, Mexico, and Canada are attempting to renew a trade agreement that Trump negotiated in his first term and once hailed as a success. The U.S. has commenced formal talks with Mexico to revamp the US-Mexico-Canada Agreement, known as USMCA. However, discussions with Canada have not started, and the escalating trade conflict raises doubts about their potential resumption.

“Canada told the Americans in advance that if these tariffs landed, it would stop negotiating and retaliate,’’ said Barry Appleton, senior fellow at the Center for International Law at New York Law School. ”The American trade representative said publicly he would not tolerate retaliation. Both sides have now committed themselves in public, which is how escalation stops being a choice.’’

Gillies reported from Toronto. Associated Press writer Michelle L. Price contributed to this report.