Canada has imposed retaliatory tariffs on about $20 billion worth of US goods, escalating an 18-month-old trade dispute with its largest trading partner after negotiations between the two countries broke down last month.
The counter-tariffs, which took effect shortly after midnight on Tuesday, range from 15% to 50% and target products including steel, furniture, clothing and electronics.
The dollar-for-dollar measures deepen uncertainty over the future of the US-Mexico-Canada Agreement, USMCA, which is facing annual reviews after US President Donald Trump declined to extend the pact for another decade.
The latest move follows US tariffs introduced last month on Canadian products including wine, furniture, dairy, cement, clothing, fishing rods and hockey equipment. Those measures cover about $20 billion, or 5%, of Canadian exports to the US.
Canadian and US government data show that nearly 68% of Canada’s total exports this year have gone to the US, with about 80% of those shipments moving duty-free under the USMCA.
The trade agreement has helped provide some resilience to Canada’s domestic economy, but the latest US tariffs, imposed under a Depression-era US law, do not allow Ottawa to apply the pact’s exemptions.
The escalating dispute has raised concerns about investment and economic growth in Canada, whose economy is roughly 13 times smaller than that of the US.
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“What we are worried about is an escalatory spiral,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Prime Minister Mark Carney’s advisory committee on bilateral US economic relations. “But at the same time, we totally understand that the prime minister needs to find areas of leverage,” Harvey said.
Carney said last week that his government remained prepared to sign a trade deal that would benefit both countries.
However, a Canadian government source said there are currently no talks between ministers or government officials from the two sides.
The dispute could also have political consequences for Carney, who has enjoyed broad support among Canadians but could see that support weaken as the economic impact of the trade war becomes more pronounced, political analysts said.
Trump also threatened last month to raise US tariffs on all cars, trucks and automotive parts imported from Canada to 50% from January 1. He has also signed an executive order seeking to rename Lake Ontario as “Lake America.”
Harvey urged the Canadian government to keep diplomatic channels open with Washington and avoid excessive rhetoric while waiting for the US administration to reassess the dispute from an economic perspective.
“Canadian government needs to keep channels open to the United States and not go overboard in terms of rhetoric and reacting to the rhetoric from the American side, while waiting for the American decision-making process to come back to economics,” he said.
REUTERS
