US-Canada Trade War Deepens as Trump Administration Warns Ottawa of Economic Fallout

Trade tensions between the United States and Canada have escalated sharply after negotiations between the two countries collapsed, triggering new US tariffs on Canadian goods and retaliatory measures from Ottawa.

The latest US tariffs impose a 50 per cent duty on about $20 billion worth of Canadian products, representing roughly 5.5 per cent of Canada’s exports to the United States.

Canada has responded by announcing matching tariffs on selected American products, including goods from the US steel and dairy industries. The new Canadian measures are scheduled to take effect on September 8.

US Transportation Secretary Sean Duffy warned that Canada would suffer more than the United States from an escalating trade conflict, pointing to the two countries’ significant economic relationship.

The United States currently accounts for approximately 70 per cent of Canadian exports. Duffy argued that Canada benefits far more from bilateral trade than the US and predicted that Canadian Prime Minister Mark Carney would eventually return to negotiations.

However, Carney has adopted a firm stance, accusing Washington of attacking Canada and rejecting what he described as an unacceptable trade agreement.

The Canadian prime minister said the United States had made last-minute demands that would restrict Canada’s ability to negotiate trade agreements with other countries. He also cited concerns over what he described as threats to the French language and Quebec’s cultural identity.

Carney announced the retaliatory tariffs after walking away from the negotiations, declaring that Canada would not accept terms it considered unfair.

US President Donald Trump responded by criticising Canada on social media and repeating his long-standing argument that the country benefits from its economic relationship with the United States without contributing enough in return.

The latest dispute marks another significant deterioration in relations between the two long-standing allies since Trump returned to the White House in January 2025.

Trump has repeatedly floated the idea of Canada becoming the 51st US state, remarks that have further strained relations between Washington and Ottawa.

Carney, who took office two months after Trump returned to the presidency, has argued that the relationship between the two countries has changed permanently and that Canada must reduce its economic dependence on the United States.

The escalating trade dispute has already raised concerns about economic growth, employment and businesses that depend heavily on cross-border commerce.

Canada had been seeking relief from US tariffs on automobiles, steel and aluminium, which officials say have contributed to job losses and economic pressure.

US Trade Representative Jamieson Greer said Washington had offered to reduce tariffs on Canadian steel, aluminium and automobiles and remove a recently imposed duty on Canadian lumber. According to Greer, the proposed package would have given Canada more favourable treatment than any other US trading partner.

Despite the offer, no new negotiations have been scheduled, leaving the future of the trade relationship uncertain as both countries prepare for further economic confrontation.