Canada's retaliatory tariffs take effect as US trade talks stall
A Canadian Flag flies outside the Canadian Embassy in Washington, DC on Aug. 26. UPI-Yonhap
OTTAWA — Canada's retaliatory tariffs on U.S. goods took effect after midnight on Tuesday, intensifying an 18-month-old trade war and spurring Prime Minister Mark Carney to urge a further shift away from the country's biggest trading partner.
The Canadian levies follow 50 percent tariffs the United States imposed on some $20 billion of Canadian goods last month, after several rounds of negotiations collapsed. The breakdown has widened a rift between the longtime allies, both of whom have blamed the other for the failed talks.
"We have everything we need to pivot and prosper," Carney said on Tuesday in a video posted on YouTube after the tariffs came into effect.
"That pivot will come at a cost. There's always a cost to action. But it doesn't come close to the cost of standing still," he said.
A government source said there are currently no talks between the two sides on the level of ministers or government officials.
Ottawa designed the retaliatory measures to put economic and political pressure on Washington, Canadian government officials said, and the tariffs are expected to hit sectors in some competitive states such as Michigan and Ohio, ahead of U.S. midterm elections in November.
The counter-tariffs cover some $20 billion of U.S. goods, with duties ranging from 15 percent to 50 percent across products from steel and furniture to clothing and electronics.
While the new tariffs affect a small amount of exports compared with total trade between the U.S. and Canada, some analysts worry the standoff could destabilize the U.S.-Mexico-Canada Agreement, the free-trade pact that succeeded NAFTA. Together they have underpinned commerce across North America for decades.
"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 Carney's advisory committee on bilateral U.S. economic relations.
"But at the same time, we totally understand that the prime minister needs to find areas of leverage," Harvey said.
Trump's social media posts focused on Canada over the holiday weekend as Ottawa's tariff deadline approached.
Canadian private jet maker Bombardier would no longer be allowed to sell its planes in the United States unless it started manufacturing in the country, Trump said in a post on Truth Social on Monday, without saying whether an official government order would follow. The company's shares opened down more than 6 percent on the Toronto Stock Exchange on Tuesday.
On Monday, Trump posted a map of North America draped in the U.S. flag, including Canada and Mexico. He also shared an AI-generated image reviving a running jab at Carney, calling him "Governor," a reference to his repeated taunt that Canada should become the 51st U.S. state.
Trump's tariffs implemented last month hit sectors including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment, covering $20 billion, or 5 percent, of Canadian exports to the U.S.
According to Canadian and U.S. government data, Canada has shipped almost 68 percent of total exports to the U.S. this year, out of which roughly 80 percent moved duty-free due to exemptions under the USMCA pact. Protections under the agreement have provided the domestic economy some resilience.
The new tariffs, imposed under a Depression-era U.S. law, do not allow Ottawa to exercise USMCA exemptions.
Concerns about the USMCA's future have fuelled uncertainty about investment and growth, as Canada wages a trade war against an economy 13 times its size.
Polls also show Carney has broad support from Canadians, but that could disappear within months as the consequences of the trade war sink in, according to political analysts.
A new poll from Angus Reid on Tuesday showed that approval of Carney's performance jumped 11 points to 62 percent from an August poll.
Meanwhile, just 20 percent of Americans approved of Trump's tariffs on Canadian goods, a Reuters/Ipsos poll found.
Trump threatened last month to raise U.S. tariffs on all cars, trucks and automotive parts from Canada to 50 percent starting January 1, and signed an executive order renaming Lake Ontario as Lake America.