Canada will impose retaliatory tariffs on US goods worth around $20 billion after trade talks with the US broke down and Washington imposed 50% tariffs on some Canadian imports. The new Canadian measures will come into effect on September 8.
The Canadian government has said it will respond to US tariffs "dollar for dollar". According to the country's finance minister, the aim is to tax US imports with the same burden as the relevant Canadian goods when they enter the US.
The retaliatory tariffs will affect around 700 categories of US products. The rates will range between 15% and 50%, and the goods affected include steel, aluminium, machinery, electronics, clothing and processed foods.
The escalation followed the breakdown of negotiations between the two countries. Washington and Ottawa have been discussing possible reductions in U.S. tariffs on Canadian cars, steel and aluminum, but have failed to reach an agreement. Among the contentious issues were the conditions for the auto sector and the scope of any tariff relief.
The U.S. administration has already imposed 50% tariffs on about $20 billion in Canadian goods. President Donald Trump has also threatened 50% tariffs on Canadian cars, trucks and auto parts starting in 2027 if the two countries fail to reach a new trade deal.
The Canadian government has also announced a C$7.5 billion package to support affected companies and workers. It includes interest-free loans and payment deferrals for businesses that will be hit hardest by the trade conflict.
The dispute is particularly sensitive for the auto industry, as the production chains between Canada and the United States are highly integrated. Parts and components often cross the border multiple times before a vehicle is completed. Higher tariffs could increase costs for both Canadian and American manufacturers.
The trade tensions are also putting additional pressure on the future of the USMCA agreement between the United States, Canada and Mexico. A prolonged tariff confrontation could lead to higher prices, disruption of North American supply chains and weaker investment activity in affected sectors.
The Canadian dollar reacted relatively calmly to the news and even appreciated slightly against the US currency as investors assessed the scale of the retaliatory measures and their potential impact on the economy.