Canada’s counter-tariffs kick in as a longer trade fight looks likely

Canada’s latest round of retaliatory tariffs on American goods started on Tuesday, and there is still no deal in sight.

The new duties cover almost C$28bn (£15bn) of US products — steel, furniture, cotton T-shirts and more — and some rates go as high as 50%. Fresh fish and lobster were originally on the list but were pulled after Canada’s seafood sector objected, showing how carefully Ottawa has to tread when hitting its biggest trading partner.

Tariff Wars

Talks remain stalled

Both sides say they want an agreement, but negotiations that broke down in late August have not restarted. Prime Minister Mark Carney has said Canada wants a “durable” deal that works for both countries and is ready to talk whenever Washington is. US Trade Representative Jamieson Greer has pushed back, saying America already offered its best terms and that Canada walked away. He has also warned that further Canadian retaliation could lead the US to block some Canadian imports.

President Trump added pressure over the weekend, threatening to cut off all US business with Canadian plane-maker Bombardier unless it moves production south. The company is a major employer and contributed more than C$7bn to Canada’s GDP in 2024. Trump also criticised Canada’s exchange rate and posted a map of North America (plus Greenland) covered in the US flag.

What is already in place

The two countries still have the world’s largest two-way trading relationship, worth nearly $900bn in 2025. The US already charges 25% on Canadian cars and trucks plus extra duties on steel, aluminium and lumber. In late August Trump added 50% tariffs on items such as dairy, alcohol, hockey sticks and perfume.

Canada’s new “dollar-for-dollar” measures sit on top of earlier retaliatory taxes on US-made vehicles that do not meet USMCA/CUSMA rules.

Public support, business caution

Polls show most Canadians back hitting back. Economists, however, warn the latest tariffs will push up prices on everyday goods such as clothes, food and furniture. The Canadian Chamber of Commerce says firms accept some retaliation but do not want an endless spiral; they are planning for a drawn-out dispute.

The lobster trade illustrates the tight links: American-caught lobster is often processed in Canada and then sold back in the US, which is why Ottawa dropped seafood from the latest list.

Economy so far

Canada’s economy looked reasonably resilient earlier in the year — GDP grew 3.3% in the second quarter and 181,000 jobs were added between April and July. August, however, saw 41,000 jobs disappear around the time the new US tariffs arrived and talks collapsed. Manufacturing picked up a little as more people bought Canadian-made goods.

Carney wants to reduce Canada’s reliance on the US market. By July the share of Canadian exports going to the United States had already fallen to 66% from a pre-dispute average of 75%.