Canada-US Trade War Escalates as Tariffs Take Effect

Canada and the US are engaged in a full-scale trade war after the collapse of tariff talks between the two nations. Prime Minister Mark Carney acknowledged that 'America has changed' and that Canada would not return to its old relationship with the US.

The US imposed 50% tariffs on $20 billion worth of Canadian goods, prompting Canada to retaliate dollar for dollar beginning September 8. The targeted sectors include steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Carney foreshadowed the shift at the World Economic Forum in Davos in January, warning that countries should reduce their vulnerability to economic coercion by strengthening their economies at home and diversifying abroad.

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, Béland said the countries are witnessing 'the beginning of a full-scale trade war,' though he cautioned that the situation could change rapidly.

The breakdown adds urgency to Carney's push to diversify beyond the United States, aiming to attract $1 trillion in foreign investment by 2030 and double non-US investment over the next decade. Goldy Hyder, president and CEO of the Business Council of Canada, said businesses increasingly see the shift as lasting beyond Trump.