US and Canada Plunge Into Trade War as 50% Tariffs Take Hold

A Deal That Never Was

It was a dramatic reversal. As recently as Tuesday, President Donald Trump had paused the tariffs for three days, posting on social media that the two sides "have a DEAL!" Then, in a matter of hours, everything fell apart. Over two weeks of trade talks between the US and Canada collapsed late Friday night — made all the more stunning because Trump himself told reporters Friday afternoon that negotiators had "pretty much" struck a deal, even as the talks continued to labor over complex issues.

Canadian Prime Minister Mark Carney blamed the breakdown on what he called the Trump administration's "uneconomic" and "unfair" demands. "In recent days, the United States proposed new terms that were uneconomic, unfair, and undermined the net benefits for Canada," Carney told reporters. "They asked too much, and they offered too little." The American side told a different story. US Trade Representative Jamieson Greer said late Friday that Canada had made last-minute demands that upset the pact. With each side pointing fingers at the other, the midnight deadline arrived — and so did the tariffs.

What the Tariffs Actually Cover

The new tariffs impose 50% duties and are set to impact about $28 billion worth of goods exported from Canada, from wine to hockey sticks to cement, covering about 5% of what Canada exported to the US last year. The scope is wide but not total. The administration carved out key Canadian exports, including energy, potash, and critical minerals, from the new tariffs. That carve-out is significant — Canada is a major energy supplier to the US, and Carney was quick to highlight it.

Trump last month threatened to invoke Section 338 of the Tariff Act of 1930 to hit a range of Canadian goods with the additional 50% duties. Notably, no president has ever used Section 338 to impose tariffs since it became law nearly a century ago. The use of this rarely-touched legal authority signals just how far outside normal diplomatic channels this dispute has traveled.

Canada Fires Back

Carney announced that retaliatory Canadian tariffs would go into effect on September 8 and would target dairy, appliances, agricultural equipment, pulp and paper, and electronics. These are not symbolic gestures — they strike at real American industries with real American workers. The Canadian Chamber of Commerce had previously warned that escalating duties "would damage both economies, drive up costs for US families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on trade" under the existing trade framework.

At a press conference, Carney likened the US actions against Canada to a conflict. "You're at war when you get attacked," he said. "We got attacked." The language was blunt and deliberate. Trade between the two countries totaled $376 billion in the first half of the year alone — double the pace of US-China trade and trailing only Mexico. The stakes, in other words, are enormous.

A Relationship Transformed

This represents an unprecedented breakdown in relations with the second-largest US trading partner. The backdrop makes it even more striking. The US, Canada, and Mexico had all signed a free-trade agreement replacing NAFTA during Trump's first term — a deal once celebrated as a signature achievement. Trump declined a 16-year extension of that agreement in July, opting instead for annual reviews, a shift that injected chronic uncertainty into the relationship and set the stage for the current crisis.

With Canada's retaliatory tariffs set to hit on September 8, both governments now face a narrowing window to restart talks before the economic damage compounds. Consumers on both sides of the border are likely to feel the pinch — higher prices on everything from wine and dairy to appliances and building materials. Whether either side blinks first, or whether this becomes a prolonged trade war between two of the world's closest allies, may define the economic mood of the coming year.