Canada says it will match US tariffs 'dollar for dollar' as trade talks break down

A fresh wave of US tariffs on a wide array of Canadian goods came into effect on Saturday after a last-minute breakdown in trade talks.

Announcing the suspension of negotiations shortly before the Friday night deadline, Canadian Prime Minister Mark Carney said he would impose reciprocal tariffs on US goods "dollar for dollar".

Carney said "last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal".

Trade negotiators had been engaged in intense talks since July, after President Donald Trump threatened to impose a 50% levy on nearly $20bn (C$28bn; £14bn) of Canadian imports by 19 August.

Trump had temporarily paused those tariffs earlier in the week, saying the two sides were close to signing a trade deal that was "very good" for both countries.

But minutes before the deadline for a deal, Carney said that while "important progress" had been made in the talks it was "not enough to meet our objectives for Canadians".

"As a result, this evening, I have decided to suspend trade negotiations with the US and have directed negotiators to return to Ottawa," he said.

"Last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal."

After Carney's announcement US trade representative Jamieson Greer said in a statement: "Tonight, Canada declined to finalise the trade deal under the terms agreed earlier this week.

"Despite the US offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk backs of other commitments by Canada have upended the careful balance reached in the past days."

The breakdown in talks marks a significant shift in tone from earlier in the week, when both US and Canadian officials sounded optimistic that a trade deal beneficial for both countries was within reach.

Negotiators were reportedly discussing a deal that would reduce US tariffs on Canadian steel and aluminium from 50% to 25%, and on Canadian autos from 25% to 15%.

In exchange, Carney had asked Canadian provinces to restore US alcohol to store shelves.

The breakdown of the talks puts the US-Canada relationship in uncharted territory, and will be a major test for Carney's premiership.

The two countries have developed one of the world's most deeply economically integrated trading relationships, and Canada sends approximately 70% of its exports south.

But tensions between the two major trading partners have been simmering since Trump returned to office in January last year and unleashed a wide-ranging global programme of tariffs, upending decades of free trade between Canada and the US.

Now that talks have broken down, Canada will be hit with new 50% US tariffs imposed by Trump using a Depression-era law called the Tariff Act of 1930.

They will be applied on a range of goods, about 5% of Canadian exports, including wine, dairy, cement, clothing and hockey equipment.

The new levies are in addition to existing tariffs the US had already imposed on Canadian steel and aluminium, autos and lumber.

Businesses and stakeholders on both sides of the border had pushed for a deal to be reached, arguing that the new US tariffs on Canada will be harmful to both countries.

What tariffs has Trump introduced and why?

In a statement, the Canadian Chamber of Commerce called the tariffs "a body blow to North American competitiveness".

"For a small Canadian exporter operating on tight margins, this isn't an abstract trade dispute. It means looking at your orders, your payroll and your employees and asking what you can still afford," said the chamber's president Candace Laing.

Canadians have told pollsters that they are willing to fight for a good deal.

A recent survey by firm Abacus Data suggested that around 36% of Canadians would support retaliating to US tariffs, while another 30% would want the Carney government to continue negotiating.

The prime minister will need to convince Canadians that the economic pain is worth the cost of standing up to the White House is search of a better agreement in the long run.

Canada could lose 90,000 jobs if the new tariffs were implemented, according to estimates in an analysis published on Thursday, external by Calgary-based economist Trevor Tombe.

Financial analysts have projected the new 50% tariffs could reduce the country's GDP by 0.3% to 0.6%.

Doug Ford, premier of Canada's most populous province Ontario, said "the prime minister has my full support for a strong response - tariff for tariff, dollar for dollar".