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The Trump administration has warned that Canada stands to suffer greatly if it chooses to engage in a trade war with the United States. New tariffs imposed by Washington on Canadian goods amount to 50%, affecting approximately $20 billion worth of products, or 5.5% of Canada's total exports to the US. In response, Canada has declared retaliatory tariffs, targeting the US steel and dairy industries, set to take effect on September 8.

US Transportation Secretary Sean Duffy stated that Canada would be at a significant disadvantage in a trade war with the US, as the country currently relies heavily on trade with its southern neighbor, accounting for roughly 70% of Canadian exports. He deemed Canada's attempt to win a trade war with the US as "foolish" and predicted that Prime Minister Mark Carney would return to negotiations "very, very quickly," as the impact on Canada would be devastating.

Carney, however, remained defiant, announcing retaliatory tariffs after the breakdown of talks with Washington. He cited US demands that would restrict Canadian trade deals with other countries, as well as threats to the French language and Quebec culture as reasons for the retaliation. Trump responded by accusing Canada of wanting the benefits of being a state without actually being one and alleged that Canadian farmers have been hit with massive tariffs for years. He vowed to end these tariffs, as well as to make Canada the 51st US state.

The ongoing trade tensions between the two countries have strained their once-strong relationship, with Canada threatening to reduce its reliance on the US and Carney expressing his belief that bilateral relations have been forever changed. Despite the economic fallout, Carney has gained political support at home for his stance against the US administration.

US Trade Representative Jamie Greer had offered to reduce tariffs on steel, aluminum, and autos, as well as eliminate a recently imposed tariff on Canadian lumber, but no further talks between the two nations have been scheduled.