Canada-US Trade War Escalates as Both Countries Prepare for Retaliation

A trade war between Canada and the US has deepened, marking a fundamental shift in what was once one of the world's closest and most durable alliances. Prime Minister Mark Carney acknowledged this break after last-ditch negotiations failed on Friday, saying that 'America has changed' and that the countries will 'not return to our old relationship.'

The US imposed 50% tariffs on about $20 billion worth of Canadian goods early Saturday, with Canada announcing it would retaliate dollar for dollar beginning September 8. The sectors targeted include steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Royal Bank of Canada economists estimate that the tariffs directly affect about 0.4% of Canada's GDP because they cover only about 5% of Canadian exports to the US. However, the damage could grow if retaliation broadens or more sectors are targeted.