Canada hits US with retaliatory tariffs as dispute escalates

Canada's retaliatory tariffs on US goods took effect on Tuesday, with Canadian Prime Minister Mark Carney and economists warning that the country's efforts to reduce its dependence on the United States would "come at a cost".

The tariffs, ranging from 15 percent to 50 percent, apply to about $20 billion worth of US imports and cover sectors including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics.

The Canadian government said the measures were imposed in response to the US' decision to levy a 50 percent tariff on $20 billion worth of Canadian goods with effect from Aug 22.

In a video address released on Tuesday, hours after the tariffs took effect, Carney said Canada had the ability to respond to the escalating trade dispute by expanding its economic and trade relationships with other countries.

"We have everything we need to pivot and prosper," Carney said.

"That pivot will come at a cost. There's always a cost to action. But it doesn't come close to the cost of standing still," he said.

Carney said Canada would continue pursuing new trade deals and diversifying its economy rather than allowing its fortunes to remain tied overwhelmingly to the US market.

The new tariffs mark another escalation in an 18-month trade dispute between the two countries, which have long maintained one of the world's largest bilateral trading relationships. Last year, the US exported $333.6 billion worth of goods to Canada and imported $381.9 billion from it, according to the Office of the US Trade Representative.

Canada has increasingly sought to reduce its vulnerability to US trade policy after repeated threats and imposition of tariffs by the US administration on Canadian goods.

A new poll by the Angus Reid Institute, a Canadian nonprofit public opinion research organization, found that a majority of Canadians in every province supported Ottawa's decision to walk away from what the government considered an unfavorable deal with Washington.

The survey also found that 62 percent of Canadians considered Canada's retaliatory tariffs "right under the circumstances".

Sixty-four percent of Canadians said they believed the country would emerge from the current period stronger as it reduces its dependence on the US.

The US administration, meanwhile, has sought to portray Canada's countermeasures as having little impact on the US economy.

US Treasury Secretary Scott Bessent said the Treasury's economic team had estimated that Canada's retaliatory tariffs would add just 0.02 percentage points to US inflation.

"The pain to the US, there is none," Bessent told Breitbart News during a livestreamed interview on Tuesday.

Bessent also said the Trump administration had offered Canada what he described as the best trade deal, adding that companies could move operations from Canada to the US if Ottawa did not accept Washington's terms.

"If I were the Canadians, I'd be careful," Bessent said. "Now that the arrangements may be splintering, everyone's going to come to our side."

US President Donald Trump also escalated his rhetoric against Canadian businesses on Monday, threatening to block Canadian aircraft manufacturer Bombardier from selling its planes in the US unless the company manufactured them in the country.

"NO MORE SELLING BOMBARDIER IN THE UNITED STATES!" Trump wrote on Truth Social.

Trump also accused Canada of restricting US companies from its government procurement market and directed the General Services Administration, working with the US Trade Representative, to take steps to remove Canadian-origin products from the agency's Multiple Award Schedules unless Canada restores what he called "full and fair reciprocity".

Since the tariffs only account for about 5 percent of Canada's goods exports to the US, "it isn't a hammer blow, but for many individual companies, it will be devastating," ING Chief International Economist James Knightley was quoted as saying by CNBC.

The targeted goods only comprise around 0.6 percent of Canada's gross domestic product, but "a collapse in exports would still be enough to push already-weak GDP growth back toward zero", Bradley Saunders, North America economist at Capital Economics, told CNBC.

Canadian Conservative Leader Pierre Poilievre accused the government of failing to provide Canadians with enough information about the costs of the trade measures. He called for Carney to recall Parliament early, so lawmakers could debate the trade war and examine the deal Ottawa has rejected.

Agencies contributed to this story.