US-Canada trade war reignites as talks fail at last minute

(CNN) — Trade talks between Canada and the United States failed at the last minute on Friday night, reigniting the North American trade war, with Ottawa vowing to match Washington’s tariffs.

Despite hopeful statements from both sides that a deal would be struck to avoid 50% US tariffs on a raft of Canadian goods locking in at the midnight deadline, the talks faltered, with Canadian Prime Minister Mark Carney saying the neighbors could not reach an agreement to “meet our objectives.”

“As a result, this evening, I have decided to suspend trade negotiations with the US and have directed Canada’s negotiators to return to Ottawa,” Carney said in a statement.

Now, 50% levies on $20 billion worth of Canadian goods have taken effect.

“Canada will match those tariffs dollar for dollar to protect our workers and businesses,” Carney added.

Trump and Carney, as well as top trade officials from both countries, had been in direct contact throughout the week after the president granted a three-day delay to the tariffs.

Earlier in the week, Trump declared: “We’ve come to a deal with Canada.” But he added that it was “still subject to finalization of documents.”

“Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk backs of other commitments by Canada have upended the careful balance reached in the past days,” US Trade Representative Jamieson Greer said in a post on X.

Greer said the offer had included “significant tariff reductions on steel, aluminum, autos, and lumber” as well as “a historic economic and national security partnership.”

But Carney said last-minute changes in the US terms “were unfair, uneconomic, and called into question the reliability of any deal.”

CNN has reached out to the White House for comment.

The latest standoff is the product of a trade relationship that has steadily deteriorated since Trump returned to office.

Trump imposed tariffs on major Canadian industries, including autos, steel and aluminum, while Canada retaliated with its own measures. While Carney walked back his most sweeping countermeasures last year, Trump remained irked by Canadian provincial leaders’ bans of American alcohol.

The tariffs that are now going into effect are relatively limited in scope, covering about $20 billion worth of goods imported from Canada – roughly 5% of the total value of goods imported to the US from its northern neighbor last year.

On their own, they are unlikely to meaningfully impact American consumers, who are already getting squeezed by high gas prices. The greater issue is the trade war it is starting.

Carney in his Friday statement said his government will introduce “additional measures to support Canadian workers and businesses,” adding to the nearly $25 billion provided in support over the past 18 months.

He said Canada’s economic growth is “accelerating” and that Ottawa would “not allow any nation to determine our future.”

What was on the table

The US had been considering lowering Canadian tariffs on steel, aluminum and cars. Steel and aluminum have been facing 50% duties, and officials reportedly were considering halving them. Meanwhile, Canadian cars have faced 25% duties, with the duties applying only to the non-US content, allowing automakers to deduct the value of American-made parts from the portion of the vehicle subject to tariffs. Officials had discussed lowering the rate to 15%.

Trump has long complained about restrictions Canada has on American dairy producers’ ability to sell there.

While the country allows US dairy products into its market, it limits the amount that can enter through quotas. Imports above those quotas can face prohibitively high tariffs, effectively restricting additional US dairy sales.

Trump had emphasized earlier this week that the deal, which had not been finalized, would be “great for our farmers.”

“Our farmers will no longer be held up because they were being hurt very badly by Canada,” he added.

Little-known law

Trump is using a little-known law from the 1930s that has never been used to impose tariffs in this way. The move is all but certain to face legal challenges, as have many of the administration’s efforts to impose new levies.

But unless courts block Trump from using the law this way, it could give him a powerful new method to impose tariffs of up to 50% on Canada — and potentially other trading partners — whenever his administration determines they are discriminating against American commerce.

Unlike some of the other laws Trump has turned to as he rebuilds his sweeping tariff regime after the Supreme Court decision earlier this year, this trade law, known as Section 338, does not appear to impose a time limit on the duties. That means tariffs imposed under the law could remain in place indefinitely unless Trump or a future president chooses to remove them.

And the potential reach is broad. The Canadian goods targeted in this first round spread far beyond the products at the heart of Trump’s stated grievances, hitting close to 500 items.

For now, Trump has spared many of the goods the US relies on Canada for most, including energy, critical minerals and fish, but that may be subject to change.

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