Canada slaps retaliatory tariffs on US$20 billion of US goods; Washington weighs response

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.

The threat underscores the prospect of a spiralling trade war between the two nations.

The official pointed out that US President Donald Trump possesses an array of tools that can be deployed in the dispute that intensified 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 impose tariffs on auto parts, starting Jan 1, 2027, as a result of Canada striking back.

Trump and Carney were close to a possible deal, but talks broke down late on Aug 21, and 50 per cent tariffs on about US$20 billion in Canadian goods came into effect just after midnight, under the never-before-used provision of the US’ 1930 Tariff Act Section 338.

Since Aug 22, the already-tense relationship has plunged into outright acrimony, with each side blaming the other for intransigence, unfair treatment and last-minute changes.

In Ottawa on Tuesday (Aug 25), the Canadian government announced that it would double its existing counter-tariffs on US steel and aluminum products to 50 per cent. American-made milk, furniture, clothing and apparel will also have new 50 per cent duties applied, as will video-game consoles, smartphones and other electronics.

Overall, those retaliatory levies will affect US$20 billion worth of annual US exports to Canada, roughly matching the dollar value of Canadian goods the White House imposed tariffs on Aug 22. That is equal to about 6 per cent of US exports to Canada in 2025.

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The counter-tariffs, which are set to take effect on Sep 8, mark a sharp reversal in Carney’s approach.

His predecessor, Justin Trudeau, implemented counter-tariffs on a long list of American items as soon as Trump started the trade conflict. Carney, however, lifted many of them in an effort to improve relations and made numerous other concessions – for instance pulling a digital services tax – as part of an attempt to repair the relationship.

The new Canadian measures will hit the highest total value of north-bound exports from Ohio, Illinois, Pennsylvania, Michigan and California, according to a preliminary analysis of the data by Bloomberg News.

That could present a political dilemma for Trump’s Republican Party as it defends its narrow majorities in the US House and Senate

Democrats see midterm election opportunities in Michigan, Pennsylvania and even in Ohio, which has been firmly under Republican control. They will likely use the Canadian retaliation to bolster their attacks on Trump’s tariff policy, which polls have shown is unpopular with voters concerned about the cost of living.

One combatant in the escalating rift between the two nations, Ontario Premier Doug Ford, called for a truce in his acrimonious exchanges with Trump.

“Things got a little heated, Joe, yesterday between both of us. He was throwing insults,” Ford, a conservative populist, told host Joe Mathieu on Bloomberg Television. “And I hit back. But I think it’d be more productive if the prime minister and the president sit down and have a fair deal for everyone.”

As Canada’s manufacturing heartland, Ontario has been heavily affected by US economic aggression. The province’s liquor agency is one of the world’s largest alcohol buyers, and Ford was among the first provincial premiers to remove American alcohol from shelves.

Ford told Mathieu that he supported Carney’s policy of retaliation. BLOOMBERG