Canada-US Trade War Looms as Tariff Talks Collapse

Canada and the United States are on the brink of a full-scale trade war after decades of privileged access to each other's markets. The collapse of tariff talks has fundamentally altered the once-close alliance, with both countries facing economic risks.

Prime Minister Mark Carney acknowledged the break in negotiations, saying Canada recognizes that 'America has changed' and the two countries will not return to their old relationship. He warned that Ottawa would retaliate dollar for dollar against U.S. tariffs starting September 8, targeting sectors including steel, dairy, appliances, and electronics.

Carney emphasized the need for economic diversification, urging Canada to strengthen its economy at home and abroad after warning of 'a rupture, not a transition' at the World Economic Forum in Davos in January.

Experts warn that the shift could last beyond Trump's presidency. Royal Bank of Canada economists estimate that tariffs directly affect about 0.4% of Canada's GDP, but the damage could grow if retaliation broadens or disrupts supply chains. Carney acknowledged the cost of retaliation, saying it would 'raise costs and reduce choice for Canadians.'