A potential deal between the U.S. and Canada fell apart Friday, leaving new tariffs to take effect, a move expected to escalate tensions between the Trump administration and America’s northern neighbor.
Beer, cheese and a long list of other Canadian imports become subject to new 50 percent tariffs at midnight Saturday.
Negotiators from the two countries had worked for weeks to reach a deal to avoid the tariffs, which President Donald Trump announced last month. Trump paused the implementation of the tariffs earlier this week as talks continued. But officials said late Friday night that a deal had not been reached and tariffs would go into effect.
“This is a missed opportunity for Canada to partner with the United States,” U.S. Trade Representative Jamieson Greer said in a statement.
Canadian Prime Minister Mark Carney said in a statement that last-minute changes in the U.S. negotiations were “unfair, uneconomic, and called into question the reliability of any deal.”
“Canada will match those tariffs dollar for dollar to protect our workers and businesses,” he said.
The tariffs apply to just 5 percent of the $382 billion in Canadian goods the U.S. imported last year and are unlikely to have a significant effect on American consumers, economists said. But they are likely to invite retaliation — Canadian Prime Minister Mark Carney has said “all options are on the table” — sparking a trade war that could scupper hopes for preserving a unified North American trade bloc.
“Economically, it’s not that important — except that the relationship itself is extremely important,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics, a nonpartisan research organization.
Tensions between the two nations have been high since Trump last year began implementing widespread “Liberation Day” tariffs on countries around the globe. Those tariffs have since been overturned by the U.S. Supreme Court, but Trump has turned to an array of other legal authorities to impose new levies.
Last month, after wildfires in Ontario sent thick smoke pouring into the United States, Trump threatened to punish Canada with new tariffs. A day later, Trump announced the new 50 percent levies; the White House said they had nothing to do with smoke and instead were intended to punish Canada for retaliating against Trump’s tariffs in 2025, when officials in most Canadian provinces removed U.S. wine and spirits from government-run stores after Trump imposed tariffs on Canadian goods for what he said was a failure to prevent illicit fentanyl from entering the United States.
Canada also imposed a 25 percent tariff on some U.S. autos in response to a similar move by Trump. The Trump administration says these actions unjustly penalized three industries — alcohol, autos and dairy — which are now the targets of the new 50 percent tariffs.
Many of Trump’s tariffs that have hit Canada have included exemptions for goods that fall under the United States-Mexico-Canada Agreement (USMCA), which accounts for the majority of imports. That is not the case with the 50 percent tariffs, however, which include no USMCA carve-outs.
Joseph Steinberg, an economics professor at the University of Toronto, said there will be enormous political pressure in Canada for Carney to retaliate. “The danger is really retaliation,” Steinberg said, adding that the tariffs could be “devastating” to specific industries targeted. One of those is the Canadian alcohol industry, which relies on the U.S. as its main exporting partner.
The U.S. and Canada rely on each other across industries, and many experts point out that a tariff war between the countries could eventually weaken both economies. The auto industry is particularly intertwined — cars are often sent between the U.S., Canada and Mexico during the building process.
“Tariffs may look tough politically, but in an integrated North American economy, they amount to economic self-harm,” Andreas Schotter, an international business professor at Ivey Business School, said in an email. “Canada and the United States do not merely sell products to one another. They make products together.”
It was unclear early Wednesday how the tariffs would affect formal U.S.-Canada talks about refreshing USMCA. The U.S. began talking to Mexico months ago about possible changes to the North American trade deal that Trump negotiated during his first term. But no formal negotiations have occurred with Ottawa.
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