Tariffs of 50% on dozens of Canadian products took effect at 12:01 a.m. Eastern time on Saturday, August 22, after negotiations between Washington and Ottawa broke down late on Friday. Prime Minister Mark Carney said Canada would answer “dollar for dollar”, with retaliatory tariffs starting on September 8.
How the deal fell apart
Earlier in the week, President Donald Trump said a preliminary agreement had been reached and delayed the tariffs. “The tariffs will be non-existent for our farmers,” he said at the time. But late on Friday, Carney announced that Canada was suspending the talks, blaming last-minute US changes that he called “unfair” and “uneconomic”. He pointed to the level of US tariffs on automobiles as a key sticking point.
“They asked too much and offered too little,” Carney said, adding that Canada “was not prepared to compromise Canada’s sovereignty or undermine our key industries.” The tariffs, he said, “are designed to hurt us and divide us.”
US Trade Representative Jamieson Greer gave a different account. “Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week,” he said, accusing Ottawa of “prolonged retaliation”, including “flat-out prohibitions on certain American goods and services.”
What is covered
The 50% duties apply to a list of Canadian goods ranging from dairy, honey, whey protein and molasses to whiskey, vodka, wine and hockey sticks. Crucially, oil, natural gas and potash are excluded, which means the tariffs cover only a fraction of total US imports from Canada. Carney put the value of affected goods at roughly C$28 billion a year, in line with an estimate from Desjardins that the measures would hit about 5% of US imports from Canada.
Unlike earlier rounds, the new tariffs also apply to goods that comply with the USMCA, the 2020 North American trade agreement. Washington did not renew that pact, opening a new negotiation that could run until 2036.
The administration is relying on Section 338 of the Tariff Act of 1930, which allows tariffs of up to 50% on countries found to discriminate against US commerce. UBS economist Abigail Watt noted that the provision has never been used before, leaving no legal precedent.
Canada’s response
Canada’s counter-tariffs, due on September 8, will target US steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, with further details promised. Provinces most exposed to the US measures include Ontario, Quebec and British Columbia, where premiers have called for a united national approach.
What it means
For consumers on both sides of the border, the immediate effect is likely to be higher prices on specific goods rather than a broad shock, given the energy exemptions. The bigger risk, economists warn, is uncertainty: Desjardins cautioned that prolonged trade friction could weigh on business confidence and investment.
Both governments say they remain open to a deal. The USTR’s office said any final agreement would need to include “comprehensive market access for all American goods.” For now, the two closest trading partners in the world are heading into autumn in a tit-for-tat tariff fight.