Canada hits US goods with fresh tariffs as talks stall

Canada has escalated its trade dispute with the United States, imposing new retaliatory tariffs on US goods after negotiations between the two neighbours stalled, raising fears of a deeper economic confrontation.

The counter-tariffs came into effect shortly after midnight on Tuesday, adding pressure on US exporters as Canadian Prime Minister Mark Carney seeks leverage in talks with Washington.

The measures cover around $20 billion worth of US products, with duties ranging from 15 per cent to 50 per cent on items including steel, furniture, clothing and electronics.

The move marks a significant escalation in an 18-month-old trade conflict between the two countries. Canadian and US officials have blamed each other for the collapse of negotiations that had appeared close to producing an agreement only weeks ago.

Canadian officials are now facing the difficult task of protecting domestic industries while avoiding further damage to an economy heavily dependent on trade with its southern neighbour.

“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 US economic relations.

He acknowledged that Ottawa needed to create pressure on Washington but warned that further escalation could carry serious economic consequences.

US tariffs already hitting Canadian exporters

The latest Canadian measures follow US tariffs imposed last month on a range of Canadian products, including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment.

Those US duties also cover approximately $20bn of Canadian exports, equivalent to around 5pc of Canada’s exports to the United States.

Government data shows that almost 68pc of Canada’s total exports went to the US this year. Around 80pc of those shipments moved without tariffs under the US-Mexico-Canada Agreement (USMCA), offering some protection to Canadian businesses.

However, the latest US tariffs were imposed under an older US law and do not provide Ottawa with the same USMCA exemptions.

The dispute is also creating uncertainty over the future of the USMCA, which faces annual reviews after US President Donald Trump declined to extend the agreement for another decade.

For Canada, the stakes are particularly high because the US economy is roughly 13 times larger.

Carney under pressure

Carney has said Canada remains ready to negotiate a deal that benefits both countries. But officials now say there are no ongoing ministerial or government-level talks between Ottawa and Washington.

Political analysts warn that while Carney currently enjoys strong public backing for his handling of the dispute, support could weaken if tariffs begin pushing up prices, hurting businesses and slowing economic growth.

A Reuters/Ipsos poll also found that only 20pc of Americans approved of Trump’s tariffs on Canadian goods, highlighting domestic concerns in the United States as well.

Trump has additionally threatened to raise tariffs on Canadian cars, trucks and automotive parts to 50pc from January 1, adding another layer of uncertainty for the deeply integrated North American auto industry.

For now, Canada is keeping pressure on Washington while trying to avoid a full-blown tariff spiral. With negotiations stalled, businesses on both sides of the border are left waiting to see whether economics — or further political confrontation — will determine what comes next.