Canada and US Engage in Trade War as Tariffs Escalate

The Canadian dollar has taken a hit following the breakdown of trade talks between Ottawa and Washington. The loonie fell by 0.45% after the US imposed tariffs on $20 billion worth of Canadian goods, marking the first market reaction to the escalating trade tensions.

Prime Minister Mark Carney stated that Canada had been asked to compromise its sovereignty and key industries, but he refused to do so. In response, President Donald Trump took to Truth Social, saying that Canada wanted the benefits of being a state without actually being one.

The US tariffs target Canadian dairy, wine, wood products, and ceramics, worth approximately $2.6 trillion (KES). Ottawa has vowed to retaliate with dollar-for-dollar measures starting September 8, targeting steel, dairy, agricultural equipment, paper, and electronics.

According to Bradley Saunders of Capital Economics, the targeted goods account for only about 0.6% of Canada's GDP, but a collapse in exports could still push the country towards recession, with a 2% hit to its economy if the tariffs were extended to 20% of US imports.