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Canada announces retaliatory tariffs on U.S. after trade talks break down

Following the breakdown of talks over the weekend, U.S. and Canadian leaders have exchanged barbs over the deal.

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Carlos Dominguez
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Carlos Dominguez

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2 minutes read

On Tuesday, Canada announced a package of retaliatory tariffs ranging from 15% to 50% on American goods, escalating the trade war between two historically close allies. The measures, which match the rates imposed by Washington, will take effect on Sept. 8, according to the timeline announced by Prime Minister Mark Carney following the entry into force on Saturday of the 50% tariffs imposed by President Donald Trump.

Measures that match U.S. tariffs

Authorities in Ottawa specified that the new tariffs will affect key sectors such as steel, dairy products and electronics. U.S. steel and aluminum, which until now were subject to a 25% tariff, will now be taxed at 50%. Appliances, cheese and other dairy products, as well as certain steel and aluminum products, will be subject to a 25% tariff.

A smaller category, which includes electrical equipment and tools, will face a 15% tariff. Collectively, these tariffs account for about 7.3% of Canadian imports from the United States.

Support for affected businesses and workers

Along with the trade measures, the Canadian government unveiled a $5.4 billion (7.5 billion Canadian dollars) relief plan aimed at companies and workers harmed by the dispute.

"This is an unprecedented challenge imposed on Canada, but Canada will meet the moment," said Finance Minister François-Philippe Champagne. "I think what Canadians can see this morning is that we stand united. We stand united in our response," he added.

Scope of Trump's tariffs

The U.S. tariffs affect approximately $20 billion worth of Canadian goods, equivalent to about 5.5% of Canada's exports to its southern neighbor, after trade negotiations broke down at the last minute. According to estimates by Oxford Economics, the effective U.S. tariff rate on Canadian exports rose from 5.1 to 6.9%.

Tariffs on plastics, electrical machinery, and wood and paper products are the main drivers of this increase. "Manufacturers in Quebec, New Brunswick, and Ontario will be affected the most," the consulting firm noted. Trump's latest tariffs do not provide exemptions for products covered by the trade agreement between the United States, Mexico and Canada (USMCA).

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