Canada prepares for an extended trade conflict as US counter-tariffs come into play

Canada's retaliatory tariffs on US goods are now in effect, as halted trade discussions raise concerns about a lengthy economic conflict.

Canada has implemented retaliatory tariffs on a broad array of US products, heightening worries that the intensifying trade conflict between the two nations may extend over a longer period.

The counter-tariffs, effective Tuesday, encompass nearly C$28 billion in American goods, including steel, furniture, and cotton T-shirts, with rates soaring to as high as 50%.

Fresh fish and lobster were initially included but were later removed due to pressure from Canada’s seafood industry, underscoring the economic challenges Ottawa faces as it retaliates against its largest trading partner.

Officials from Canada and the United States have both shown a willingness to reach an agreement; however, negotiations have been stalled since discussions broke down in late August.

Canadian Prime Minister Mark Carney stated last week that Ottawa is dedicated to achieving a “durable” agreement that would benefit both nations.

“We’re ready to finalize that agreement when the Americans are ready,” Carney stated.

US Trade Representative Jamieson Greer stated that Canada is now responsible for resuming negotiations.

“We presented them with the best deal; they examined it closely and then walked away,” Greer stated in an interview with Fox News.

Greer also warned Canada about the potential consequences of further retaliation, indicating that Washington might react by limiting imports of certain Canadian goods.

The dispute intensified on Monday as US President Donald Trump issued a threat to cease all US business with Canadian aircraft manufacturer Bombardier unless the company relocated its manufacturing operations to the United States.

Bombardier stands as one of Canada's largest enterprises, contributing over C$7 billion to the nation's annual GDP in 2024, as indicated by a report commissioned by the company from PwC.

Trump has criticized Canada in a series of posts on Truth Social, including one where he referred to the Canadian-US exchange rate as “unacceptable.”

Another post showcased a map depicting Canada, Mexico, and Greenland adorned with the US flag.

Canada and the United States share the largest bilateral trading relationship globally, with a value approaching $900 billion in 2025.

With the implementation of new US tariffs and corresponding Canadian counter-tariffs, businesses on both sides of the border are bracing for additional disruption.

The United States currently has a 25% tariff on Canadian cars and trucks, in addition to tariffs on Canadian steel, aluminum, and lumber.


In late August, Trump imposed new tariffs of 50% on various Canadian goods, which included dairy products, alcohol, hockey sticks, and perfume.

Canada's recent counter-tariffs, referred to by Carney as "dollar-for-dollar," affect numerous American products coming into the country.

These are in addition to the current Canadian retaliatory tariffs on finished American cars and trucks that fail to meet the standards set by the free trade agreement between Canada, the United States, and Mexico, referred to as USMCA in the US and CUSMA in Canada.

Polls indicate that most Canadians are in favor of taking retaliatory actions against the United States.

Economists have cautioned that the recent tariffs may lead to higher consumer prices for common items such as clothing, food, and furniture.

The Canadian Chamber of Commerce has called on the government to implement a focused strategy for retaliation. “Businesses recognize the concept of retaliation, yet they prefer to avoid continuous escalation,” stated Candace Laing, president and CEO of the Chamber, noting that businesses are bracing for a prolonged dispute.

Canada’s fisheries industry effectively advocated for modifications to the tariff list, resulting in the removal of numerous seafood products to reduce unintended impacts on the domestic economy.

The lobster industries in Canada and the US are notably intertwined, as American-caught lobster is frequently sent to Canada for processing before being returned to the US market.

The tariff escalation occurs even in the face of indications of resilience within the Canadian economy.

Canada's gross domestic product experienced a growth of 3.3% in the second quarter, with the nation adding 181,000 jobs from April to July.

Approximately 41,000 jobs were lost in August, a time that aligned with the introduction of new US tariffs and the breakdown of trade negotiations.

Manufacturing experienced a slight uptick during the period, which the Canadian government partly credited to consumers and businesses opting for more domestically produced goods.

Carney has committed to decreasing Canada’s reliance on the US by broadening the nation’s export markets.

Figures for July indicated that the share of Canadian exports headed to the US had decreased to 66%, in contrast to an average of approximately 75% prior to the trade war.

As both governments remain firm in their positions and negotiations remain stalled, Canadian businesses are increasingly preparing for the possibility that the trade dispute may last for months or longer.