The United States and Canada are now in a full-blown trade war after negotiations collapsed in Washington on Friday. US President Donald Trump has imposed 50% tariffs on $20bn (£14.6bn) worth of Canadian goods, and Canadian Prime Minister Mark Carney has vowed to retaliate "dollar for dollar". Both leaders blame the other side for the breakdown.
Trump's social media outburst and tariff details
In his first public comments since the talks fell apart, Trump wrote on social media: "Canada wants the benefits of being a State, without being one!!!" He added: "They have also charged our great farmers, for many years, massive amounts of tariffs. No more!!!"
The US tariffs came into force on Saturday and cover a wide range of products, from hockey sticks to tongue depressors. Trade experts predict some job losses, but the biggest impact is expected to be political, triggering fresh tension between the neighbours.
Carney's response and Canadian retaliation
Carney told Canadian journalists that the country was "at war" over trade with the US, after Trump "miscalculated" by escalating his tariff attack. "You're at war when you're attacked, and we got attacked," he said in Ottawa. "We cannot accept what they've offered and we will not give what they've asked."
Carney's "dollar for dollar" tariffs are expected to take effect from 8 September, with new levies on steel, dairy, appliances and electronics. The Canadian PM, who previously served as governor of the Bank of England, was elected last year after campaigning to lead a fightback against Trump, who has suggested he wants to make Canada a 51st state with "economic force".
US trade representative defends action
Jamieson Greer, the US trade representative, said the US was compelled to act after a year of retaliatory measures by Canada. He told Fox & Friends Weekend: "We've said enough and so we've taken countermeasures. Our interest is in protecting American workers and protecting American supply chains."
Dan Kelly, president of the Canadian Federation of Independent Business, estimated that 40% of small Canadian exporters will be directly hit by the US tariffs, and that nearly one-third expect their revenues will drop by 50% or more as a result.
Political backlash in US border states
The escalation drew anger from Democrat lawmakers and governors in US states bordering Canada, including Minnesota, New York and Washington. New York Governor Kathy Hochul posted on X: "Needlessly picking fights with our allies and raising prices here at home. That's Trump's economic policy in a nutshell."
Minnesota Senator Amy Klobuchar said the new tariffs meant "higher costs for small businesses, farmers, and all Minnesota families." She wrote on X: "Canada is Minnesota's #1 trading partner. Minnesotans are paying for Trump's chaos."
Future of USMCA and broader impact
The escalation has also called into question the future of the North American trade pact between the US, Canada and Mexico, known as USMCA. The pact, signed by Trump during his first term, governs about $2tn annually in goods and services between the three countries. Trump refused to renew the USMCA this summer after Canada and Mexico formally requested a 16-year renewal. When asked how the collapse in talks would affect the pact, Carney said it was "certainly not good news".
Trade tensions have already damaged relations, with tourism suffering: there was a 21% drop in Canadians entering New York state in 2025, and 3mn fewer visits compared with the previous year. A petition to expel US ambassador Pete Hoekstra from Canada has gathered around 248,000 signatures since late July, according to the Associated Press. A poll by the Globe and Mail found that only 9% of Canadians agreed the US was a "trustworthy ally", and 51% of those polled had cancelled American trips in reaction to Trump's comments.
