Canada braces for prolonged trade war as counter-tariffs on US take effect

On Tuesday, Canada implemented retaliatory tariffs on a range of US goods, with no indication of a trade deal in sight. The counter-tariffs will apply to nearly C$28bn worth of American products, including steel, furniture, and cotton T-shirts, and can reach up to 50%. Fresh fish and lobster were initially included, but were later omitted after pressure from the seafood industry.

Both US and Canadian officials have indicated a desire for a deal, but talks have stalled since August. Prime Minister Mark Carney reiterated Canada's commitment to finding a durable agreement that benefits both nations. However, US trade representative Jamieson Greer suggested Canada needed to show more willingness to negotiate.

The US has threatened to ban imports of some Canadian products, including airplane maker Bombardier, which contributes significantly to Canada's economy. With new tariffs in place, businesses on both sides are struggling to navigate the new trade landscape. The US currently imposes a 25% tax on Canadian cars and trucks, along with taxes on steel, aluminum, and lumber.

In August, Trump imposed even higher tariffs on dairy, alcohol, hockey sticks, and perfume. Canada's counter-tariffs, ranging from 15% to 50%, will be applied to hundreds of items from the US, including American milk, golf clubs, steel, aluminum, and certain clothing items. While polls show most Canadians support the retaliatory measures, economists warn that the additional costs will likely be passed on to consumers.

The Canadian Chamber of Commerce has urged the government to take a more targeted approach to retaliation. Despite signs of economic resilience, Canada's economy lost around 41,000 jobs in August, a period that coincided with the new US tariffs and the collapse of trade talks.