Canada-US Trade War Looms as Decades-Long Alliance Collapses

Canada and the US are on the brink of a full-scale trade war after decades-long privileged access to each other's markets collapsed. The once-close and durable alliance has been fundamentally altered, with both countries facing significant economic risks.

Last-ditch negotiations failed on Friday, leading Prime Minister Mark Carney to acknowledge that 'America has changed' and the countries will not return to their old relationship.

Carney said Canada would retaliate dollar for dollar beginning September 8, targeting sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. The US had imposed 50% tariffs on about $20 billion worth of Canadian goods early Saturday.

Canada's economy is heavily dependent on trade with the US, with nearly three-quarters of its goods exports going to its southern neighbor. Royal Bank of Canada economists estimate that the tariffs directly affect about 0.4% of Canada's GDP due to covering only about 5% of Canadian exports to the US.