The US-Canada trade war is escalating: Ottawa introduces reciprocal tariffs

Canada will impose matching tariffs on American goods after talks with the administration of U.S. President Donald Trump to resolve the trade dispute ended unsuccessfully. UNN reports this, citing Reuters and AP.

The new Canadian tariffs will take effect on September 8, while Washington has already imposed 50% tariffs on a range of goods from Canada. 

The U.S. tariffs took effect on August 22 and covered approximately $20 billion worth of Canadian goods. The list includes wine, furniture, dairy products, cement, clothing, hockey equipment, fishing gear, certain agricultural products, cosmetics, and jewelry.

To impose the new tariffs, the Trump administration invoked Section 338 of the Tariff Act of 1930, which allows the U.S. president to impose tariffs of up to 50% on countries that, in Washington's view, discriminate against American exports.

Talks ended without an agreement

Representatives of the United States and Canada tried until late on August 21 to reach a compromise that would avert a new round of tariff confrontation. Among other things, the sides discussed possibly reducing U.S. tariffs on Canadian-made cars from 25% to 15%, as well as lowering tariffs on steel and aluminum.

However, no agreement was reached. Ottawa and Washington accused each other of making additional demands at the last minute after the talks ended.

Canadian Prime Minister Mark Carney said the U.S. proposal was unfavorable for the country.

"They asked for too much and offered too little," Carney said.

According to him, some U.S. demands could have limited Canada's ability to conclude trade agreements with other countries and created risks for the automotive, steel, and other key industries.

Meanwhile, U.S. Trade Representative Jamieson Greer said that it was the Canadian side that allegedly refused to finalize the agreement and began demanding additional concessions.

No new talks between the sides are currently scheduled.

Canada will respond with tariffs starting September 8

After the talks failed, Carney announced the introduction of matching tariffs on a "dollar-for-dollar" basis. The Canadian tariffs will take effect on September 8 and are expected to apply to U.S. steel, dairy products, household appliances, agricultural equipment, electronics, and pulp and paper products.

The full list of goods is to be published separately by the Canadian government.

Carney acknowledged that the trade confrontation would also have consequences for Canadians themselves, including potentially causing prices to rise and reducing the choice of goods. The government is preparing support programs for businesses and workers in industries that will be hit hardest by the tariffs.

Answering a question about whether Canada is in a trade war with the United States, the prime minister said: "You are in a state of war when you are attacked. We have been attacked."

Experts warn of further escalation

Richard Fontaine, head of the Washington-based Center for a New American Security, warned that reciprocal tariffs could set off a prolonged spiral of trade restrictions. In his assessment, the Canadian authorities took into account the experience of the Trump administration's negotiations with other partners and concluded that concessions to Washington could lead to new demands.

Ontario Premier Doug Ford also supported Carney's decision to reject the agreement proposed by the United States. According to him, the American president cannot be trusted, and concessions will only encourage new demands. Ford figuratively compared Trump's behavior to that of a person who takes another person's lunch money on the first day, their hat the next, and then their shoes.

Trade between the United States and Canada

The United States remains Canada's largest trading partner. Approximately 72% of Canada's merchandise exports go to the American market.

At the same time, the United States is heavily dependent on Canadian energy resources. According to the Canadian government, the country supplies approximately 99% of U.S. natural gas imports, 85% of electricity imports, and roughly 60% of oil imports. Annual trade in goods and services between the two countries amounts to approximately $880 billion.

Economists warn that further expansion of reciprocal tariffs could lead not only to higher prices in Canada and the United States, but also to reduced investment and the restructuring of the two countries’ closely integrated production chains.

Recall

Canadian Prime Minister Mark Carney suspended trade talks with the United States over the proposed 50% tariffs.