Trade talks between the U.S. and Canada broke down on Friday, officials from both countries said, paving the way for the U.S. to impose 50% tariffs on about $20 billion worth of Canadian goods and risking an all-out trade war

Canada has declared it will match US tariffs dollar for dollar following the collapse of trade talks, according to Prime Minister Mark Carney. The announcement came shortly before the Friday night deadline, suspending negotiations and signaling a significant shift in the relationship between the two nations. Carney stated that the US's last-minute changes were unfair and uneconomic, casting doubt on the reliability of any potential deal.

The breakdown in talks marks a notable change in tone from earlier this week when both sides expressed optimism about reaching a mutually beneficial agreement. The talks had been ongoing since July, with the US threatening to impose a 50% levy on nearly $20bn of Canadian imports by August 19. However, the US temporarily paused those tariffs, claiming the negotiations were close to a successful deal.

In response to Canada's decision, US Trade Representative Jamieson Greer criticized the move, stating that Canada had declined to finalize the trade deal despite being offered the best treatment of any major exporter to the US market. He emphasized that Canada's new demands and reversal of previous commitments had disrupted the delicate balance achieved in recent negotiations.

The new US tariffs, which will be applied retroactively using the Tariff Act of 1930, will affect a wide range of Canadian goods, including wine, dairy, cement, clothing, and hockey equipment. This imposition of tariffs adds to the existing ones the US has already levied on Canadian steel, aluminum, autos, and lumber.

The situation has left businesses and stakeholders on both sides of the border concerned about the potential economic fallout. The US Chamber of Commerce warned that higher tariffs would harm both economies, increase costs for US families, disrupt supply chains, and jeopardize jobs dependent on the US-Mexico-Canada Trade Agreement. Meanwhile, a recent poll indicated that around 36% of Canadians would support retaliatory tariffs, while 30% desired the Carney government to continue negotiating.