Trade talks between Canada and the US have failed to produce a deal to prevent new tariffs from coming into force, opening another period of tension between the two neighbours. The two governments had been negotiating an agreement that would avoid 50% duties on a range of Canadian goods. But despite President Donald Trump saying this week that a “very good deal” was close, disagreements over issues including cars and alcohol appear to have derailed hopes of an agreement.
Canadian Prime Minister Mark Carney said on Friday that “last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal.” The US, meanwhile, described the collapse of the talks as “a missed opportunity for Canada to partner with the United States, which is the fastest growing economy in the G7.”
Which Canadian Products Face 50% Tariffs?
The new duties are being imposed under Section 338 of the Tariff Act of 1930, which allows the US president to impose duties of up to 50% on imports from countries accused of imposing unequal or discriminatory measures on US commerce.
The tariffs cover motor vehicles, alcoholic beverages and dairy products, as well as hundreds of other Canadian goods. The measures have now taken effect on Canadian products worth about $20 billion.
Cars and Auto Parts
The US has accused Canada of imposing “discrimination against or an unreasonable and unequal imposition” on US auto and auto-parts exports. The new duties therefore cover Canadian motor vehicles and related products.
Alcohol
Alcohol has emerged as one of the key sticking points in the negotiations. Several Canadian provinces banned the sale of US alcohol last year in response to Trump’s tariffs. Some of those restrictions remain in place, creating difficulties for American producers and merchants.
Carney had sought to have the bans suspended as part of the negotiations.
The US has imposed a 50% duty on Canadian alcoholic beverages, saying the measure would offset what it describes as discrimination against US commerce.
Dairy Products
Dairy is another major area of disagreement. The US has been pressing Canada to change its dairy quotas to provide greater access for American producers. Washington has accused Canada of denying US dairy products the benefits it provides to similar products from other countries. The new 50% duties apply to products including:
- Milk
- Cream
- Whey
- Caseinates
- Lactose
- Cheese ingredients
Other Canadian Goods Hit by the Tariffs
The new duties extend well beyond cars, alcohol and dairy. The US tariff measures also cover hundreds of other products, including:
- Seeds and other agricultural products
- Bakery mixes and other food products
- Textiles and clothing
- Cosmetics
- Furniture and household goods
- Electronics
- Machinery
- Diamonds
- Toys
The tariffs come on top of existing US duties on Canadian steel, aluminium and lumber.
Unlike some previous measures, the latest tariffs do not provide exemptions for products covered by the US-Mexico-Canada Agreement (USMCA).
However, the White House has confirmed exemptions for energy products, potash, fish, critical minerals and products already subject to Trump’s Section 232 tariffs.
Why Are the Tariffs Being Imposed?
The US says the new duties are intended to counter what it describes as unfair Canadian treatment of American products. Under Section 338, the president can impose tariffs of up to 50% to offset what the US considers an unequal burden or disadvantage placed on American commerce.
The White House has specifically cited Canadian policies affecting cars, alcohol and dairy.
The new measures cover about 5% of the $382 billion worth of goods the US imported from Canada last year.
Carney Vows a Tough Response
The breakdown in talks has prompted a strong response from Ottawa. “We have recognized from the beginning that America has changed, and that we will not return to our old relationship,” Carney said. “Our government understood, before many, that America is altering all its trade relationships. Putting tariffs on its closest allies and charging for access to its vast market.”
Carney said his government would announce further support for Canadian workers and businesses in the coming days.
Ontario Premier Doug Ford also backed a tougher response. “The prime minister has my full support for a strong response—tariff for tariff, dollar for dollar,” Ford said. “As we fight to protect Canadian sovereignty and economic security, everything needs to be on the table. Ontario is ready to do its part.”
What Tariffs Could Canada Impose on the US?
Carney said Canada would respond with reciprocal tariffs on US goods on a “dollar for dollar” basis. As of Saturday, however, Ottawa had not publicly announced which specific American products would be targeted.
Before the latest escalation, Canada’s retaliatory measures had focused on areas including US steel and aluminium, as well as certain vehicles not covered by the USMCA.