Canada slaps retaliatory tariffs on US goods worth US$20 billion amid spiralling trade war

[OTTAWA] The Trump administration is discussing additional trade penalties against Canada after Prime Minister Mark Carney unveiled dollar-for-dollar retaliation to new tariffs imposed by the US on Aug 22.

Additional US escalation against its northern neighbour could include higher tariffs and other trade actions, according to a White House official, who spoke on the condition of anonymity to discuss internal deliberations. The official said that an administration response to the latest Canadian moves was expected.

US President Donald Trump, the official pointed out, possesses an array of tools that can be deployed in the dispute that began after talks between the US and Canada broke down late last week.

Trump has already promised to double auto tariffs on Canada to 50 per cent and tariff auto parts, starting Jan 1, 2027, as a result of Canada’s hitting back.

Canada’s retaliatory tariffs

This comes as Canada on Tuesday (Aug 25) unveiled retaliatory tariffs on about US$20 billion worth of US annual imports and rolled out aid for businesses and workers, matching Washington’s latest duties dollar-for-dollar.

The counter-tariffs on US goods take effect on Sep 8 and impose duties of 15 per cent, 25 per cent and 50 per cent across around 700 products imported from south of the border, a government statement said.

The new tit-for-tat tariffs mark a new low in relations between the long-time allies, and Trump earlier on Tuesday threatened to rename Lake Ontario, which straddles both countries, “Lake America.”

“Our dollar-for-dollar, rate for rate counter-tariffs as well as a multi-billion dollar support package will protect workers, farmers, families, and businesses,” Canada’s Finance Minister Francois-Philippe Champagne said.

The White House and the US Trade Representative did not immediately respond to a request for comment.

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Canada levied the 50 per cent tariffs on steel, aluminum, furniture and clothing. It set the 25 per cent tariffs on cheese, appliances and some seafood, and placed the 15 per cent tariffs on electronics and tools, a Canadian government official told reporters.

‘Political pressure’

Trump’s new tariffs are relatively narrow, affecting roughly 5 per cent of Canada’s exports to the United States. But trade analysts say they could have severe, concentrated effects on some sectors that are already struggling like wood products, particularly kitchen cabinet makers.

Canada’s retaliatory tariffs, calculated using 2024 trade figures, cover goods accounting for nearly 4.5 per cent of Canada’s imports from the United States.

Industry Minister Melanie Joly said the counter-tariffs were primarily aimed at protecting Canadian businesses but were also aimed at applying political pressure before Americans vote in the Nov 3 midterm elections.

“We need to make sure that the competitors don’t have access to the Canadian market in a better way than their own... products, and that’s why the retailers need to show that from Canada,” she said.

“Second, we’re also targeting products that will target states in the US and so we’re being wise and strategic to put political pressure, and that’s why we think it’s the right thing to do right now.”

The Canadian tariffs will also cover some prepared foods, perfumes and toiletries, plastics, lumber, wood pulp and paper products, carpets and clothing.

The list also targets industrial goods including iron and steel, aluminium, hand tools and other metal products, machinery and electrical equipment, as well as rail engines, motorcycles, furniture and gaming equipment, government documents showed.

Aid for businesses, workers

Canada also unveiled a C$7.5 billion (US$5.4 billion) package of measures featuring support for small and medium-sized businesses, a stream for funding cash flow of companies, and support for workers at risk due to the new tariffs.

The Business Development Bank of Canada, a federal lender, will provide part of the support to affected businesses, offering interest-free loans of between C$2.5 million and C$5 million.

Joly said companies would not be required to make repayments for 36 months, a period that would run through the end of the Trump administration’s term. BLOOMBERG, REUTERS