US-Canada Trade Talks Collapse, Tariffs Hit

50% US tariffs on $20bn in Canadian goods took effect after last-minute talks failed; Canada vows.

After weeks of intense negotiation, US-Canada trade talks broke down late Friday night, and 50% US tariffs on approximately $20 billion worth of Canadian goods took effect at midnight Saturday. Canadian Prime Minister Mark Carney announced the suspension of negotiations minutes before the deadline, saying he had directed negotiators to return to Ottawa. Carney stated that "last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal." US Trade Representative Jamieson Greer countered that Canada had "declined to finalise the trade deal under the terms agreed earlier this week," blaming new demands and walk-backs by Canada for upending the balance reached in prior days.

The breakdown marked a dramatic reversal from earlier in the week. On Tuesday, President Donald Trump paused the threatened tariffs for three days, writing on social media that the two sides had a deal. As recently as Thursday, Canadian minister Dominic LeBlanc told reporters after meeting Greer that the sides were "very close" and continuing to make progress. Negotiators remained at the US trade representative's office past 10:30 p.m. ET Friday. According to NBC News, Carney said the US introduced last-minute changes including limiting tariff reductions to autos only and excluding medium and heavy-duty trucks, as well as seeking to restrict Canada's ability to pursue trade deals with other countries.

The new 50% duties cover about 5% of Canadian exports to the United States, hitting goods including wine, dairy, cement, clothing, and hockey equipment, according to the BBC. Al Jazeera reports the tariffs also apply to electronics and industrial machinery. These levies are in addition to existing US tariffs on Canadian steel, aluminium, autos, and lumber. Carney announced that Canada will retaliate "dollar for dollar," with counter-tariffs concentrated in sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. According to NBC News, the retaliatory measures are set to take effect on September 8. Carney told reporters that Canada was pursuing a "focused response" rather than a broad-based escalation.

Canada sends approximately 70% of its exports south of the border, making it highly vulnerable to US trade measures. According to the BBC, economist Trevor Tombe's analysis estimated Canada could lose 90,000 jobs, and financial analysts projected the new tariffs could reduce GDP by 0.3% to 0.6%. The AP reports that Royal Bank of Canada economists estimate the tariffs directly affect about 0.4% of Canada's GDP because they cover only about 5% of exports. The AP also reports that Canada supplies 99% of US natural gas imports, 85% of its electricity imports, and 60% of its crude oil imports, underscoring that the dependence is not one-sided. According to NBC News, the US Chamber of Commerce warned that higher tariffs would risk 13 million American jobs tied to the North American trade pact.

Provincial leaders across Canada broadly backed Carney's decision. Ontario Premier Doug Ford wrote that "the prime minister has my full support for a strong response — tariff for tariff, dollar for dollar," and said Trump "is not to be trusted whatsoever." British Columbia Premier David Eby said Canadians' politeness should not be mistaken for weakness. However, Alberta Premier Danielle Smith urged the federal government to restart negotiations, writing that "no one benefits from a trade war." The Canadian Chamber of Commerce called the tariffs "a body blow to North American competitiveness." In the US, California Governor Gavin Newsom criticized the move, writing on social media: "Our closest ally. Our critical trading partner. And Trump is hitting Canada with 50% tariffs."

Greer said in a Saturday morning interview that no new talks are planned with Canada and that the US would "respond to Canadian retaliation." According to NBC News, the tariffs were imposed under Section 338 of the Tariff Act of 1930, a Depression-era law that has never been deployed before, and the measures are all but certain to be challenged in court. The collapse adds urgency to Carney's push to diversify trade beyond the United States. The AP reports that Canada has signed more than 20 trade and security agreements across five continents in the past year, and Carney is aiming to attract $1 trillion Canadian in investment by 2030. Analysts suggest the shift may outlast the current administration, with one expert telling the AP that "the idea that things will return to normal once Donald Trump leaves the White House is probably just wishful thinking."