Canada has imposed retaliatory tariffs on $20 billion worth of US goods, with duties ranging from 15 per cent to 50pc on products including steel, furniture, clothing and electronics.
The dollar-for-dollar measures mark an escalation in the trade dispute between the neighbouring countries, as officials on both sides trade blame over the collapse of a deal that appeared close to completion two weeks ago.
The growing tensions have also raised concerns over the future of the broader US-Mexico-Canada free trade agreement (USMCA), which is facing annual reviews after US President Donald Trump declined to extend the pact for another decade.
“What we are worried about is an escalatory spiral,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Prime Minister Mark Carney’s advisory committee on bilateral US economic relations.
“At the same time, we totally understand that the prime minister needs to find areas of leverage,” Harvey added.
US tariffs introduced last month by the Trump administration have targeted Canadian exports including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment. The measures cover goods worth around $20bn, or 5pc, of Canada’s exports to the United States.
Canadian and US government data show that Canada has sent nearly 68pc of its total exports to the US this year. Around 80pc of those shipments were previously traded duty-free under USMCA exemptions, providing some protection for the Canadian economy.
However, the latest tariffs, imposed under a Depression-era US law, do not permit Ottawa to use USMCA exemptions.
Uncertainty over the future of the trade agreement has added to concerns about investment and economic growth as Canada faces a trade dispute with an economy roughly 13 times its size.
Political analysts say Prime Minister Carney continues to enjoy broad public support, but warn that it could weaken in the coming months as the economic impact of the trade war becomes more apparent.
Only 20pc of Americans supported Trump’s tariffs on Canadian goods, according to a Reuters/Ipsos poll.
Carney said last week that his government remained prepared to sign a trade agreement that would benefit both countries.
Trump last month threatened to increase US tariffs on Canadian cars, trucks and auto parts to 50pc from January 1. He also signed an executive order renaming Lake Ontario as “Lake America”.
A Canadian government source said there are currently no ministerial or official-level talks between the two countries.
Harvey urged Ottawa to keep diplomatic channels open with Washington and avoid escalating rhetoric while waiting for the US administration to refocus on economic considerations.
