Carney Gambles on 'No Deal Better Than Bad One' as Tariffs Hit Canadians

Canadian Prime Minister Mark Carney has walked away from trade negotiations with the United States, allowing tariffs of 50% on $20 billion worth of Canadian goods to take effect. This move marks a test for his 'no deal is better than a bad one' doctrine, which he has repeated throughout the negotiations.

According to economists, the tariffs will disproportionately affect certain sectors such as plastics, chemicals, forest products, and machinery. Robert Kavcic of BMO Capital Markets estimates that the effective U.S. tariff rate on Canadian goods will increase to 7.5% from about 5%. The imposition of these levies is expected to have a modest impact on Canada's economy but may further damage business confidence.

Carney has vowed to retaliate with dollar-for-dollar tariffs on U.S. goods, set to take effect on September 8. This move has received broad support from Canadians and even his political opponents, despite the risks involved. However, some economists warn that the retaliatory tariffs may hurt Canadian consumers by driving up the cost of imports from the U.S.