The brief respite that the United States and Canada gave themselves in their tariff negotiations has come to nothing. The talks definitively failed on the night from Friday to Saturday, with Canadian Prime Minister Mark Carney confirming that from September 8 his country will impose reciprocal tariffs, dollar for dollar, on American products. He also threatens to take retaliations into the energy sector, a taboo until now, while Washington has already begun applying its new taxes on imports from the neighboring country starting this very Saturday. The escalation in the deterioration of one of the world’s main trade relationships is underway.
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“We have taken this step after much thought,” said the former head of the British central bank. “We are aware that this will raise costs and reduce options for Canadians,” as well as affect American companies and states caught in the middle of the dispute, he added. The new trade war between the two countries also affects the ability to collaborate between two neighbors who, until Donald Trump’s arrival at the White House, had been an example of harmonious relations between two countries.
These Canadian tariffs on imports from the United States will affect products such as steel, dairy, appliances, paper, electronics, and agricultural equipment, among others. In turn, the United States is imposing 50% tariffs from this Saturday on hundreds of Canadian products, from electrical material to hockey equipment, including liquors and wood.
“Canada will impose tariffs equivalent to those of Washington, dollar for dollar, in order to protect Canadian workers, farmers, families, and businesses,” Mark Carney reported. “We cannot accept what they have offered us, and we will not give them what they have asked for,” added the prime minister, lamenting that the trade war with the Americans continues.
In his meeting with the media, Mark Carney denied the comments of Jamieson Greer, U.S. trade representative, regarding Canadian negotiators making last-minute demands and backtracking on already agreed points. “We clarified what we were proposing and the American responses did not stop disappointing us,” Carney specified.
The liberal politician said Canada will continue analyzing other options with different government levels and trade bodies. In this regard, he referred to the energy sector, of marked importance for the neighboring country. “I don’t think they want us to stop sending our energy,” he pointed out.
By opting for an eye for an eye, the Canadian prime minister assumes a significant economic and political risk. The United States had threatened to impose harsher measures if Canada responded to its tariffs, something that could trigger a serious escalation in a trade war affecting 900 billion dollars and services between the two neighbors. The United States is the main market for exports from the neighboring country, which supplies it, among other products, vehicles, car parts, and oil. Canada, in turn, is the largest buyer of U.S. goods only behind the European Union, according to data from the Department of Commerce in Washington.
But Carney counts on the support of a population among whom the almost universal appreciation for the United States has plummeted after Trump’s return to power and the Republican’s statements warning of his interest in turning Canada into the “51st state” of his country. A survey published this week found that 56% of Canadian voters demand that the government “take a tough stance and make no further concessions.”
The trade break between the two countries comes just four days after Trump proclaimed in a social media message, in the middle of Tuesday night, that the talks had made progress and a last-minute agreement had been reached to delay the application of those burdensome tariffs on Canadian products for three days.
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“I have paused the 50% tariffs against Canada, scheduled to take effect tomorrow (Wednesday), for three days because Canada and the United States, subject to the completion of some documents, have reached an agreement!” the leader triumphantly wrote on his social network, Truth. Without giving further details, the president added in his message that the Keystone XL pipeline project between the two countries “would be revived.” That plan, in which Trump has great interest, had been canceled during Democrat Joe Biden’s term due to opposition from native tribes, among others, in the affected territories, where the severe environmental damage that this infrastructure could cause was denounced.
Tension throughout North America
Tariffs have been one of Trump’s preferred tools to threaten and negotiate with all kinds of countries, including his main diplomatic and economic partners. This has especially strained relations with Canada and Mexico, nations with which the United States maintains a free trade pact, the USMCA, fundamental for the three economies. The leader, who boasts that the word “tariff” is one of his “favorites in the English language,” at one point threatened to impose more tariffs on his northern neighbor because of the smoke that reached the United States from the fierce fires that devastated Canada last month.
The Trump administration justifies the tariffs against its northern neighbor with the argument that they are retaliation against those Canada adopted last year. But those tariffs, in turn, were already a response to those the U.S. government had been imposing since the Republican’s inauguration.
To impose the new tariffs, the U.S. government has invoked section 338 of the Tariff Act of 1930, in the midst of the crisis after Black Tuesday of 1929. These tariffs can be applied without the Department of Commerce conducting a prior investigation into the practices of the country to be punished, and can remain in effect indefinitely.
At the end of July, when he proposed those tariffs, Trump warned that they would also include products within the USMCA, although excluding energy products—subject to another tariff section—and goods that the United States considers key, such as some minerals. The executive order at that time also includes an ad valorem tax of up to 50% for a wide category of products such as essential oils, honey, flowers, seeds, chemicals, textiles, wood, paper, metals, machinery, and luxury items. This effectively prevents Canadian trade in the U.S. market for a wide variety of products.
The new escalation in the trade disagreement between the two countries comes when both, and Mexico, must negotiate precisely an update of the USMCA, the largest trade agreement in Latin America signed in 2020, during Trump’s first term, to replace the Free Trade Area between the two countries created in Bill Clinton’s era. The Republican, who six years ago boasted that the pact signed then was the best possible, now shows reluctance to renew it and puts obstacles in the way of his partners to continue. Thus, the June presidential order warned that the U.S. president had decided not to renew the USMCA in its current form because “the agreement is not good enough for the United States,” according to the presidential order.
The support of provincial governments has not been long in coming. Doug Ford, Premier of Ontario, called for Canadian unity, expressing his unwavering support for Ottawa’s decision. “It is clear that we can no longer trust the United States or count on them as we did before,” said Tim Houston, Premier of Nova Scotia. The Canadian Chamber of Commerce also lamented this scenario, emphasizing that it is a very hard blow to the competitiveness of this region of the world.
The opposition in Ottawa also reacted to the tariff response announced by Mark Carney. “The Conservatives support measures aimed at protecting Canadians and our industries from these unfair U.S. tariffs,” said Pierre Poilievre, leader of the Conservative Party of Canada, on social media.
