US and Canada enter new trade battle
Image: Adrian Wyld
The US and Canada are back to trading blows in addition to goods and services, with a fresh round of tariff disagreements breaking out over the weekend.
New US tariffs of 50% on ~$20 billion worth of Canadian goods, covering 5% of the country’s US-bound exports, took effect Saturday, with Canadian PM Mark Carney responding with new dollar-for-dollar tariffs on US goods starting early next month.
- The US tariffs cover Canadian goods including alcohol, hockey equipment, cement, and dairy.
- It excludes Canadian energy, potash (a key fertilizer ingredient), and critical minerals.
Trade between the US and Canada totaled $376 billion during the first half of this year, twice the amount between the US and China, and ranking behind only Mexico as America’s top trade partner.
How we got here
On July 20, Trump threatened to invoke Section 338 of the Tariff Act of 1930 to impose additional tariffs on Canadian goods.
- He cited Canadian restrictions on American alcohol, dairy, and vehicles, some of which Canada implemented in response to earlier US tariffs.
- Section 338 allows US presidents to impose tariffs of up to 50% on countries found to discriminate against American commerce, though it hasn’t been used since becoming law in 1930.
Trump’s tariffs on Canada were scheduled to take effect last Wednesday. Less than two hours before that deadline, Trump announced a deal was in progress and postponed the duties for three days. But that deal never made it across the finish line, causing tariffs to take effect.
What was on the table?
Before negotiations ended, the two sides had made progress on a potential deal:
- The US would cut tariffs on Canadian steel and aluminum in half, from 50% to 25%.
- Top-line US tariffs on Canadian autos would fall from 25% to 15%.
- Canada would remove retaliatory tariffs on US autos, steel, and aluminum, while PM Carney would push provincial leaders to lift their bans on American alcohol.
However…Shortly ahead of the deadline, US and Canadian officials accused each other of adding new last-minute terms to the deal that they considered unfair.
- US officials said Canada added late concessions they weren’t prepared to give, including trade in lumber, aluminum, steel, and the automotive sector.
- Carney said the US made additional demands involving Canadian protections for French language and culture, exemptions to US auto tariffs, and Canada’s ability to strike trade deals with other nations.
Looking ahead… No further US-Canada trade talks are currently scheduled. The two countries, along with Mexico, are also conducting a scheduled review of the USMCA, their trilateral free trade pact, with the Trump admin saying it will only recommend renewal if outstanding trade issues are resolved.
📊 Flash poll: In general, do you support or oppose the Trump admin’s new tariffs on Canada?
See a 360° view of what pundits are saying →
Sprinkles from the Left
- Some commentators argue that the collapse of US/Canada trade talks expose the limits of President Trump’s aggressive tariff strategy. They note that with Canada choosing to walk away from US demands, both countries will face escalating tariffs that’ll raise costs for American businesses and consumers while further straining the deeply integrated trading relationship.
- Others contend that President Trump’s aggressive tariffs and annexation threats are leaving Canadian leaders little room to compromise, giving in to US pressure is politically toxic at home and risks deepening regional tensions, making retaliation and a tougher stance toward Washington increasingly difficult to avoid.
- “U.S.-Canada breakdown shows limits of Trump’s aggressive trade strategy” –David J. Lynch, WaPo
- “Trump has singled out us Canadians for special treatment in his tariff war – there is no choice but to get nasty” –Matt Gurney, The Guardian
- “Follow the Money All the Way to Mark Carney’s Canada” –Matthew A. Winkler, Bloomberg
Sprinkles from the Right
- Some commentators argue that Trump is putting a trade agreement that benefits the US at risk by threatening new tariffs and keeping the USMCA’s future uncertain, which could raise costs and disrupt the cross-border trade that American farmers and manufacturers, particularly those in Republican-led states like Texas, depend on.
- Others contend that President Trump’s latest tariffs on Canada are escalating a trade fight with a close ally, hurting US consumers, undermining the economic and security benefits of closer North American ties, risking a deeper Canadian pivot toward Europe and China, and demonstrating why Congress should reclaim greater control over tariff policy from the president.
- “Trump, Canada Tariffs and USMCA” –WSJ Editorial Board
- “Trump’s Canadian Tariffs Make No Sense” –National Review Editorial Board
- “Trump's unfair tariffs are an opportunity for Canada” –Conrad Black, National Post
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