After trade negotiations crumbled at the eleventh hour, US President Donald Trump's 50% tariffs on scores of Canadian imports kicked in on Saturday.
The new levies are expected to affect about 5% of Canada's annual exports to the US, roughly $US20 billion in goods ranging from ice hockey sticks to agricultural products. Canada's Prime Minister Mark Carney quickly promised on Saturday that his government would roll out "dollar for dollar" retaliatory measures starting on 8 September.
On Monday, Carney said US negotiators had raised objections to French-language content on streaming platforms and French-language labelling rules. He rejected the idea that those issues were negotiable, saying in French: "For the Americans, questions about the French language, Quebec culture, francophone culture and Canadian culture are irritants. Here in Quebec, here in Canada, they are rights."
Trump then intensified the confrontation Monday, telling Canadian leaders to "fall in line" or face consequences "far WORSE" than existing tariffs and threatening new 50% tariffs on Canadian vehicles, auto parts and steel.
Trump added another provocation Tuesday, saying the United States was giving "serious consideration" to renaming Lake Ontario "Lake America" in a feud with Ontario Premier Doug Ford. Such a change would be reminiscent of the Republican president's executive order last year to rename the Gulf of Mexico to the Gulf of America.
Canada then announced its retaliatory measures. Canadian officials acknowledged the counter-tariffs will raise costs for some businesses and consumers but said they expect the overall economic effects to be moderate.
No further talks are scheduled. The latest escalation between the two countries, which once held one of the world's most durable trade alliances, plunges them deeper into a trade war that has kept both sides of the border on edge throughout Trump's second term in office. Experts warn steeper tariffs raise costs for businesses and almost always trickle down to households in the form of higher prices.
"Nearly all industries and professions are likely to see downstream effects from this spiralling trade dispute," said Augustine Lo, of law firm Dorsey & Whitney, whose work includes advising clients on international trade.
Here's what we know.
Which Canadian goods are affected?
Again, the 50% tariffs from the US are set to affect $US20 billion of Canadian goods.
Canada sends the vast majority of its goods exports to the US, 72% last year, and the Trump administration says the new taxes will be levied on products ranging from ice hockey sticks to wine and cement. The list is long. According to documents published by the White House, other goods subject to the tax include honey, seeds and agricultural products, as well as select makeup, perfumes, clothing, jewellery, furniture, cameras, fabric and more.
The 50% levy also applies to some products that were previously protected under the US-Mexico-Canada Agreement, a trade pact from Trump's first term. That marks a shift from past levies and further underlines questions around the future of the USMCA overall.
Why has Trump imposed the tariffs?
To impose these 50% tariffs, Trump reached back to a long-dormant Great Depression-era law: Section 338 of the Tariff Act of 1930.
When the US and world economies were in collapse nearly a century ago, Congress passed the 1930 law as part of broader "Smoot-Hawley" legislation, named after its congressional sponsors. The act raised tariffs more generally across the board, and became notorious among economists for limiting world commerce and making the Great Depression worse. But Section 338, which authorises the president to slap import taxes of up to 50% on imports from countries that have discriminated against US businesses, has never been used specifically to raise tariffs until now.
No investigation is required to justify the levies. Nor is there any limit on how long they can stay in place. Since there's no precedent, however, the latest tariffs may also see more legal challenges.
When announcing his planned tariffs last month, Trump claimed that Canada was unfairly discriminating against US exports of automobiles, alcohol and dairy products. The president expressed anger over Canada's retaliation against his own tariffs last year, noting Canadian imports of American alcohol and cars started to fall last northern spring.
How is Canada responding?
Canada's Carney quickly promised to match the new levies "dollar for dollar", later announcing retaliation would begin on 8 September. He noted Canada's tariff increases would target steel, dairy, appliances, agricultural equipment, pulp and paper and electronics.
The prime minister said Canada was willing to drop remaining retaliatory tariffs on steel, aluminium and autos if the US substantially lowered its own, and to encourage provinces to restore US alcohol sales. But eventually, he said Washington's final demands went too far.
Carney accused Washington of using "economic integration as a weapon," and that Canada had been "attacked" by the latest US tariffs. He said his country had the reserves and resilience to respond.
Canada then struck back at the United States on Tuesday with retaliatory tariffs on about $US20 billion worth of American goods, including steel, dairy products, appliances and farm equipment.
The new tariffs extended well beyond industrial goods, hitting everyday purchases such as seafood, cheese, clothing, cosmetics and toilet paper, with some facing duties as high as 50%.
Goods facing 50% tariffs include some steel and aluminium products, furniture and clothing. Appliances, dairy products including cheese, fish and seafood, and certain steel and aluminium derivatives will face 25% tariffs. Existing Canadian counter-tariffs on US cars will remain in place.
The tariffs will take effect September 8 at rates of 15%, 25% and 50%, with Canada matching the corresponding US tariff rate on more than 700 products. The tariffs on many American products would double from 25% to 50%, with the largest share of the new measures affecting steel and aluminium.
Canada also announced a support package for workers and businesses affected by the dispute worth $US7.5 billion in Canadian dollars ($5.4 billion in U.S. dollars).
What happens next?
Tariffs are taxes paid by importers, or businesses that buy goods from abroad. That typically trickles down to consumers through higher prices and can also create uncertainty for workers across affected sectors.
North America now has a "new tariff landscape," Dave Townsend, a partner at law firm Dorsey & Whitney, said on Saturday. He noted a big question is whether the latest levies prove to be temporary.
The 50% tariffs come on top of previously imposed levies, including a 10% rate Trump slapped on Canada just last month ostensibly for failing to do enough to prevent imports produced by forced labour and separate sectoral levies impacting trading partners globally.
The growing trade sanctions on Canada underscore Trump's willingness to risk breaking established alliances. And Canada's reluctance to accept a deal may reflect recent experience.
Trump has repeatedly targeted Canada, even after instances where it made concessions following his demands. Some tolls on the newly opened Gordie Howe Bridge will be shared for 15 years, despite the fact that Canadians paid for the span linking Detroit In Michigan and Windsor in Ontario. Canada also withdrew a digital services tax last year. All the while, Trump has threatened more tariffs over everything from a TV ad criticising his trade policies, later pulled by Ontario's government, to wildfires that blackened skies across North America.
Steeper tariffs have already contributed to higher inflation, but appeared to level off some in recent months, according to researchers at the Federal Reserve Bank of St. Louis, notably after the Supreme Court in February struck down some of Trump's most sweeping levies.
The Associated Press
