Carney Hits Back At Trump With $20 Billion Tariffs As Canada-US Trade War Escalates

Canada has retaliated against the United States with tariffs on about $20 billion worth of American goods, escalating a trade war that has strained relations between the two countries.

The tariffs cover hundreds of US products, including steel, aluminium, cheese, appliances, clothing, cosmetics and farm equipment, with rates ranging from 15% to 50%.

The latest retaliation comes as Canada weighs how far it can push back against Washington without damaging an economy deeply tied to the United States. According to Associated Press, the dispute could have implications beyond Canada, as other US allies watch whether a smaller economy can resist Trump’s demands without making major concessions.

Carney has argued that Washington’s demands could weaken important Canadian industries and reduce the country’s economic independence. Trump’s repeated comments about Canada becoming the 51st US state have also helped consolidate public support behind the Canadian government.

“Carney and Canada have become symbolic of resistance to him,” Canadian historian Robert Bothwell said. “And what he’ll want to do is make an example of Carney and Canada and theoretically terrify everybody else while in fact showing them that they need to remove themselves even further from the United States.”

Ottawa matches Washington with fresh tariffs

Canada’s latest measures came into force at 12:01 a.m. Tuesday through an order in council. Ottawa said the tariffs were designed to match the United States’ measures dollar for dollar and rate for rate.

The products covered by the new duties represent about $20 billion in US exports to Canada, or roughly 6% of the $333.6 billion worth of goods the United States exported to Canada last year.

RBC Economics, the research arm of the Royal Bank of Canada, said the retaliation was unlikely to have a significant effect on overall US economic growth, although individual American businesses could face substantial pressure.

Canada has also taken action beyond tariffs. Eight of the country’s 10 provinces continue to restrict or prohibit the sale of US alcohol. The Distilled Spirits Council has said American spirits exports to Canada dropped by more than 70% year over year after those restrictions were introduced.

Trump threatens further action against Canada

The latest escalation follows the collapse of Canada-US trade talks on August 21. Since then, Trump and members of his administration have increased tariffs and issued threats against Ottawa, while also attacking Carney personally and portraying Canada as economically dependent on the United States.

Trump on Monday targeted Canadian aircraft manufacturer Bombardier, threatening to stop the company from selling aircraft in the US unless it manufactures them there.

“NO MORE SELLING BOMBARDIER IN THE UNITED STATES! Their products aren’t good enough!” Trump posted on Truth Social. “If they want our Market, they must build here, and stop treating America like a ‘piggybank.’”

Flavio Volpe, president of APMA Canada, a manufacturing trade group, responded on X that Bombardier uses US-made GE and Honeywell jet engines and employs about 3,000 workers in the United States.

Trump has previously warned that Canada’s economy could collapse if Carney continued to treat him as “the enemy”. He has also threatened consequences “worse than anything that has ever happened to a Canadian Politician.”

US Trade Representative Jamieson Greer has separately warned that Washington could respond by banning some Canadian products outright.

The dispute has extended beyond trade policy. Trump renamed Lake Ontario “Lake America”, a move that was ignored and mocked in Canada. Google and Apple changed the names on their maps for US users following pressure from Trump. On Monday, he also posted a map of North America covered in the US flag.

“After renaming a gulf and a lake, maybe the next step for him is to rename a river?” said Daniel Béland, a political scientist at McGill University.

Trade dispute reshapes Canada-US ties

The confrontation has intensified public opposition to Trump in Canada. Canadians have reduced travel to the United States and launched boycotts of American products, while Trump’s repeated references to Canada becoming the 51st state have further fuelled tensions.

The current dispute began after Trump returned to the White House and introduced a series of tariffs on Canadian goods, despite having negotiated and repeatedly praised the North American trade agreement during his first term. Many of the new tariffs are in breach of that agreement.

The two economies are deeply integrated. Canada and the United States have traditionally maintained close economic, cultural, defence and security ties, with supply chains operating across their shared border. Before relations deteriorated, around 400,000 people crossed the border each day.

Carney has indicated that negotiations could restart if Washington changes its approach.

He has said talks can resume when the Americans “stop doing memes, stop throwing shade, stop trying to be tough” and become serious.

So far, the pressure from Washington has not produced the concessions Trump has sought. Instead, it has strengthened backing for Carney, according to analysts cited by Associated Press.

Nelson Wiseman, professor emeritus of political science at the University of Toronto, said Trump’s 2024 election victory had deepened Canadian distrust of the United States, extending beyond the American government to perceptions of Americans themselves.

“Canada-U.S. relations, even without confrontation, will never be what they were before Trump,” he said.

Carney positions Canada as a test case

Carney’s response has increasingly placed Canada at the centre of a wider debate over how smaller countries should deal with Trump’s trade policies.

At the World Economic Forum in Davos in January, Carney warned that major powers were using economic integration as a tool to pressure smaller countries. The speech helped establish him as a prominent advocate for governments seeking to reduce their vulnerability to US economic pressure.

Trump responded the following day by saying Canada “lives because of the United States” and warning Carney: “Mark, remember that next time you make your statements.”

Carney is also due to address the European Parliament next week, giving him another international platform to make the case for Canada’s approach.

“The Canadian public is behind the Carney government and the world is watching what will happen next,” Béland said. If Canada’s defiant approach succeeds, he said, it “could be used as a template” for resisting the Trump administration’s trade policies.

Auto industry faces a bigger threat

The immediate tariff measures are not the only concern for Canadian industry. Trump has threatened to impose 50% tariffs on Canadian vehicles, auto parts and steel next year if Ottawa does not “fall in line”.

Such a move could put pressure on an industry that relies on production networks spanning the US and Canada. Vehicles and components can cross the border several times before a finished car reaches the market.

“We want the cars to be made in Detroit and in South Carolina and in Tennessee and in all of our places where we make cars. We don’t want them to be made in Canada,” Trump said.

A 50% tariff on automobiles could increase production costs for Canadian plants while also pushing up vehicle prices across North America because components and finished vehicles move between the two countries throughout the manufacturing process.

Carney has warned that accepting Washington’s demands could eventually leave Canadian industries “gradually wound down in Canada and wiped out.”

Canada faces a larger US economy but has leverage

Canada is entering the confrontation from a position of economic disadvantage. The US economy is roughly 13 times larger, while more than 70% of Canada’s exports go to the United States.

Under normal circumstances, that imbalance would make it difficult for Ottawa to sustain a prolonged trade confrontation with Washington.

But Béland said the political circumstances surrounding the dispute make it different from a conventional trade conflict. He pointed to Trump’s domestic unpopularity, the approaching US midterm elections and legal challenges that could overturn some of the tariffs imposed by his administration.

“Under normal conditions, this would be a very long shot for Canada,” he said.

The United States also relies on Canadian supplies in several important areas. US refineries receive about 4 million barrels of Canadian oil a day, while American farmers depend heavily on Canadian potash, a key fertiliser used in agriculture.

Canada has so far chosen not to fully exploit that leverage. Canadian leaders have ruled out taxing or restricting some critical exports that could put additional pressure on the US economy.

Associated Press reported that Canada is entering the latest stage of the dispute with some economic momentum. Its economy expanded at an annualised rate of 3.2% in the second quarter, more than twice the 1.5% growth rate recorded by the United States.

Industry Minister Mélanie Joly said the government believes the country can emerge from the confrontation successfully.

“I’m convinced that we will be able to show the world that Canada will win this trade war.”