Canada-US Trade War Escalates as Tariffs Take Effect

The decades-long close relationship between Canada and the US has been fundamentally altered due to the collapse of trade talks. Prime Minister Mark Carney acknowledged this shift, stating that 'America has changed' and that the countries would not return to their old relationship.

The US imposed 50% tariffs on about $20 billion worth of Canadian goods early Saturday, prompting Canada to retaliate dollar for dollar beginning September 8, targeting sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. Carney said that Canada would 'raise costs and reduce choice for Canadians' with the measures, but would also announce additional assistance for affected businesses and workers.

Canada's economy is heavily reliant on trade with the US, with nearly three-quarters of its goods exports going to the country. However, 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.

Carney has been urging countries to reduce their vulnerability to economic coercion by strengthening their economies at home and diversifying abroad, a call he made at the World Economic Forum in Davos in January. He said that the collapse of tariff talks points to the fact that 'the old Canada-U.S. relationship is over'.