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

Canada's retaliatory tariffs on a range of US goods came into effect on Tuesday, with no sign of a trade deal on the horizon.

The counter-tariffs will apply to nearly C$28bn ($20bn; £15bn) worth of American products, from steel to furniture to cotton T-shirts, and will be as high as 50%.

Fresh fish and lobster were also on the list, but Canada later omitted them after pushback from its seafood industry - a sign of the tricky balance it has to strike as it retaliates against its largest trading partner.

Both US and Canadian officials have said they would like to strike a deal, but no movement has been made to resume talks after they collapsed in late August.

Speaking to reporters last week, Prime Minister Mark Carney said that Canada is still in search of a deal with the US that is "durable" and in the best interests of both countries.

"We're ready to sit down and strike that deal when the Americans are ready," Carney said.

US trade representative Jamieson Greer said on Thursday the ball is in Canada's court.

"We offered them the best deal, they looked at it square in the face and turned around," Greer said in an interview with Fox News, adding that there has been sparse communication with the Canadians since talks collapsed.

In a separate interview with Canadian broadcaster CBC, Greer cautioned against retaliation and suggested the US might hit back by banning the import of some Canadian products.

President Donald Trump threatened on Monday to halt all US business with Canada-based airplane maker Bombardier unless it moved its manufacturing south.

The aerospace giant is one of the largest in the country, contributing over C$7bn to Canada's annual GDP in 2024, according to a report by accounting firm PwC.

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Trump took aim at Canada in a series of other Truth Social posts over the weekend, including one that called Canada's exchange rate with the US "unacceptable".

Another post showed a map of North America - including Canada and Mexico - and Greenland all overlaid with the US flag.

Canada and the US have the world's largest bilateral trading relationship valued at nearly $900bn in 2025.

With new US tariffs and Canadian counter-tariffs now in effect, businesses on both side are scrambling to deal with what comes next.

The US currently has in place a 25% tax on Canadian cars and trucks, as well as taxes on Canadian steel, aluminium and lumber. In late August, President Donald Trump imposed new 50% tariffs on other goods like dairy, alcohol, hockey sticks and perfume.

Canada's counter-tariffs, which were described by Carney as "dollar-for-dollar" and range from 15% to 50%, will from Tuesday be applied to hundreds of items coming in from the US.

Products like American milk, golf clubs, steel, aluminium and certain clothing like jackets and T-shirts will face 50% tariffs. Cheese, toilet paper and certain household appliances like air conditioners will face 25% tariffs, while fork-lift trucks and industrial moulds will be hit with 15% tariffs.

These levies are in addition to existing retaliatory taxes Canada had placed on finished American cars and trucks that are non-compliant with a free trade agreement between Canada, the US and Mexico, known as the USMCA in the US and CUSMA in Canada.

Polls suggest the majority of Canadians support , external their country imposing retaliatory tariffs on the US.

But economists warn that the latest counter-tariffs will raise prices for consumers , external on everyday goods like clothing, food and furniture.

The Canadian Chamber of Commerce has also urged the Carney government to take a surgical approach to retaliation.

"Businesses understand retaliation but don't want to see endless escalation," said the Chamber's CEO and President Candace Laing in a statement to the BBC on Friday, though she added that businesses "are preparing for this trade dispute to last".

Pushback from the fisheries industry was enough for Canada to alter its counter-tariffs by removing dozens of seafood items to avoid unintended consequences to its own economy.

The lobster industry in both Canada and the US are heavily dependent on the other, with American-caught lobster often sent north to be processed before it is shipped back to the US and sold.

Ahead of the latest tariffs, Canada's economy had shown signs of resliency. Its GDP grew 3.3% in the second quarter and it had gained 181,000 jobs from April to July.

But around 41,000 jobs were lost in August, a period that coincided with the new US tariffs on Canada and the collapse in trade talks.

One sector that saw a modest bump was manufacturing - a gain the Canadian government attributes to consumers and businesses buying more made-in-Canada products.

Carney has said he wants to diversify Canada's trade away from the US.

July figures show the share of US-bound Canadian exports dropped to 66% from an average of 75% before the trade war.

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