Canada is bracing for a prolonged trade war with the US as retaliatory tariffs on American goods took effect on Tuesday, with no immediate signs of a resolution.
The counter-tariffs will impact nearly C$28bn ($20bn; £15bn) worth of US products, ranging from steel and furniture to cotton T-shirts, with some tariffs reaching as high as 50%.
Initially, fresh fish and lobster were included in the list, but Canada later removed them following pushback from its seafood industry, highlighting the delicate balance the country must maintain while retaliating against its largest trading partner.
Both US and Canadian officials have expressed a desire for a deal, but negotiations have stalled since collapsing in late August.
Prime Minister Mark Carney stated last week that Canada is seeking a "durable" deal with the US that serves the best interests of both nations. "We're ready to sit down and strike that deal when the Americans are ready," Carney said.
US trade representative Jamieson Greer, however, indicated on Thursday that the onus is on Canada. "We offered them the best deal, they looked at it square in the face and turned around," Greer told Fox News, noting limited communication with Canada since talks broke down.
In a separate interview with CBC, Greer cautioned against retaliation, suggesting the US might respond by banning certain Canadian imports.
President Donald Trump had previously threatened to cease all US business with Canadian aircraft manufacturer Bombardier unless it relocated its manufacturing operations south.
Bombardier is a significant player in Canada, contributing over C$7bn to the country's annual GDP in 2024, according to a PwC report commissioned by the company.
Trump also criticized Canada on social media over the weekend, calling its exchange rate with the US "unacceptable" and posting a map of North America overlaid with the US flag.
Canada and the US share the world's largest bilateral trading relationship, valued at nearly $900bn in 2025. With the new tariffs in place, businesses on both sides are navigating the evolving situation.
The US has already imposed a 25% tax on Canadian cars and trucks, along with tariffs on Canadian steel, aluminum, and lumber. In late August, President Trump introduced new 50% tariffs on goods such as dairy, alcohol, hockey sticks, and perfume.
Canada's counter-tariffs, described by Carney as "dollar-for-dollar," will be applied to hundreds of US items. These are in addition to existing retaliatory taxes Canada placed on American cars and trucks that did not comply with the USMCA (or CUSMA in Canada) free trade agreement.
A map illustrates the value of US imports to Canada affected by tariffs, by state. Ohio leads with C$3.23bn, followed by Illinois (C$2.85bn) and Pennsylvania (C$2.49bn).
Polls indicate that a majority of Canadians support their country's imposition of retaliatory tariffs on the US. However, economists warn that these tariffs will increase prices for consumers on everyday items like clothing, food, and furniture.
The Canadian Chamber of Commerce has urged the government to adopt a targeted approach to retaliation. "Businesses understand retaliation but don't want to see endless escalation," stated CEO and President Candace Laing, adding that businesses "are preparing for this trade dispute to last."
The seafood industry's pushback led Canada to remove numerous seafood items from its counter-tariff list to prevent unintended economic consequences.
The lobster industry in both Canada and the US relies heavily on each other, with American-caught lobster often processed in Canada before being re-exported to the US.
Prior to the latest tariffs, Canada's economy showed resilience, with GDP growing 3.3% in the second quarter and 181,000 jobs gained from April to July. However, approximately 41,000 jobs were lost in August, coinciding with the new US tariffs and the collapse of trade talks.
Manufacturing saw a modest increase, which the Canadian government attributes to increased domestic purchasing.
Prime Minister Carney has committed to diversifying Canada's trade away from the US. July figures show that the share of Canadian exports bound for the US decreased to 66%, down from an average of 75% before the trade war began.
