Canada will impose retaliatory tariffs on US goods beginning Sept 8 as trade negotiations collapse

The United States imposed 50 per cent tariffs on USD 20 billion worth of Canadian products early Saturday, and Canada said it would retaliate beginning September 8 after last-ditch negotiations failed to resolve the latest strain in relations between the historic allies.

President Donald Trump's import taxes will hit about 5 per cent of what Canada ships to the United States every year, including products ranging from hockey sticks to tongue depressors.

Canada Prime Minister Mark Carney said that “in the coming days, we will release the details of these new tariff measures, which will come into force the Tuesday after Labor Day.” The dollar-for-dollar retaliation would target steel, dairy, appliances, agricultural equipment, pulp and paper and electronics, he said from Ottawa.

He disclosed that Canada was willing to drop remaining retaliatory tariffs on steel, aluminum and autos if the United States substantially lowered its own, and to encourage provinces to restore US alcohol sales. But he said Washington's final demands went too far, saying, “They asked too much and offered too little,” Carney said.

Trump's top trade negotiator, Jamieson Greer, said the Republican administration was offering to cut tariffs on steel, autos and lumber, “things that are sensitive for them. And they've always had the best deal, and they still would have an even better deal, but they didn't want that," he told "Fox & Friends Weekend.

He added, “We're moving forward with measures that respond to Canadian retaliation.”

The moves also call into question the future of a North American trade agreement covering the United States, Canada and Mexico that is crucial to industry in all three countries.

Carney said the US added last-minute terms that would have reduced tariff relief for Canadian-made vehicles, restricted Canada's ability to strike trade deals with other countries and weakened protections for language, culture and sovereignty. He said such demands were “unacceptable."

But Greer, the US trade representative, said that after a year of retaliation by its longtime ally, “We've said enough, and so we've taken countermeasures. Our interest is in protecting American workers and protecting American supply chains.”

No further talks are planned.

The breakdown in negotiations marked a sharp reversal from two days earlier, when officials from the two countries sounded as if they were headed toward a compromise.

Carney said Ottawa would “hit back” with targeted tariff protection for industries exposed to the new US duties, including some steel products.

Ontario Premier Doug Ford, who leads Canada's most populous province, backed Carney's response, saying the prime minister had his “full support” for retaliation “tariff for tariff, dollar for dollar” and that “everything needs to be on the table.”

A typically cooperative alliance goes sour

The political impact will likely be even bigger than the economic fallout. The countries sold each other USD 880 billion worth of goods and services last year.

The tariffs were initially supposed to kick in at 12:01 am Wednesday. Trump extended the deadline for three days to allow talks to continue, but the countries could not reach an agreement in time.

The US and Canada have wrangled for decades over trade, poking each other over sore spots such as Canadian softwood lumber imports and US access to Canada's protected dairy market.

Somehow, they still managed to remain friends, allies and trading partners. Canadian soldiers fought alongside Americans in Afghanistan after 9/11. The 5,525-mile US-Canada border is undefended, and nearly 330,000 people and USD 2 billion worth of goods cross it every day; 800,000 Canadians live in the United States.

Trump's approach to dealing with Canada marks an extraordinary departure from the traditionally cooperative relationship between the two countries. Trump has imposed tariffs on Canadian goods in a push to bring manufacturing back to the United States and made inflammatory comments about turning Canada into America's 51st state.

Carney said Canada had recognised that “America has changed” and that the two countries would “not return to our old relationship.”