The US and Canada trade dispute escalated on Tuesday (local time) with Washington announcing fresh restrictions on Canadian goods, after Ottawa introduced new tariffs on American products.The latest US measures will hit Canadian alcohol, dairy products, motorcycles and mopeds, while Canadian goods will also face restrictions in some major US government contracts. The White House said the new import restrictions will take effect on September 29.They came hours after Canada imposed tariffs on $20 billion worth of US imports, following the breakdown of trade talks between the two countries last month. The widening dispute has put further strain on a relationship between two countries that have long been close allies and trading partners.US-Canada tariff tussleWith its latest move, US is targeting most alcoholic beverages from Canada, along with some dairy products including whey, motorcycles, mopeds and various types of molasses.The move follows Canada’s decision to target hundreds of American products with tariffs of 15%, 25% or 50%. The list includes steel, aluminium, cheese, appliances, clothing, cosmetics and farm equipment.The Canadian measures cover about $20 billion in American goods, or roughly 6% of the $333.6 billion worth of goods the US exported to Canada last year.Trump has also taken action against Canadian goods beyond the tariff measures. He directed the US General Services Administration to declare Canadian products ineligible for large, long-term US government contracts until Canada allows “full and fair reciprocity″ for American products.The latest escalation comes after Washington imposed 50% tariffs on about 5% of Canadian imports on August 22, accusing Canada of unfairly treating American dairy, alcoholic beverage and auto industries.Canada prepares to rely less on USFor Canadian Prime Minister Mark Carney, the confrontation has reinforced the need to reduce the country’s dependence on its biggest economic partner.More than 70% of Canada’s exports still go to the US. Carney said exports to other countries were rising sharply and were on track to double over the next decade.He acknowledged that the trade measures would bring short-term pain but said they would encourage Canada to move faster on investment, infrastructure and trade diversification.“It was easy business, but it meant we relied too much on one economic partner,” he said. “That time is over.”Carney said Canada’s response was necessary because Canadian companies were facing US tariffs while American goods could continue entering Canada tariff-free. He said Ottawa was not trying to escalate the dispute but needed to protect Canadian workers.He also said the demands made by Washington during the failed negotiations showed that the two sides had fundamentally different views about their economic relationship.“The most fundamental issue is that the cumulative US demands revealed that they wanted us to become even more reliant on them, not less,” he said. “In too many areas, they wanted dependency, not a true economic partnership.”According to Carney, Washington had sought limits on French-language and cultural protections, influence over future trade agreements and terms that would weaken Canada’s auto, steel and forestry sectors.“It’s about ensuring that no country can hold us hostage. And that we can live how we want to live,” he said.
Ottawa looks towards Europe
As Canada seeks to diversify its trade, it is also exploring a deeper relationship with the European Union that could stop short of membership.A Canadian official familiar with the discussions said possible options included expanding existing agreements, negotiating a new treaty or creating other forms of cooperation.Canada is already consulting provinces, territories and labour groups about what a deeper relationship with the EU could look like, however, no model has been chosen yet.The official spoke on condition of anonymity because they were not authorised to discuss the talks publicly.Carney is due in Strasbourg, France, next week, where he will attend European Commission President Ursula von der Leyen’s State of the European Union address on September 16. He will address the European Parliament the following day.
Politics and public sentiment
The latest confrontation follows months of worsening relations. The US and Canada have long had trade disputes, particularly over Canada’s protected dairy market and subsidies for softwood lumber producers, but the two countries remained friends and staunch allies.Under Trump, relations have deteriorated rapidly. His repeated comments about making Canada the 51st US state have added to the tensions, while Carney came to power in a come-from-behind political victory last year after promising to stand up to him.Some Canadian provinces have responded by banning the sale of US alcoholic products. Canadians have also sharply reduced travel to the US and boycotted US goods, moves Carney praised as signs of national resolve.British Columbia Premier David Eby said the province would install new signs at US border crossings reading: “Welcome to British Columbia, Canada. Strong, proud and will NEVER be the 51st state. Sorry!”“While our kindness is one of our greatest strengths, you should never, ever mistake that kindness for weakness,” Eby said.
No immediate return to negotiations
Canada’s Trade Minister Dominic LeBlanc said Ottawa was assessing the latest US measures and remained in contact with US Trade Representative Jamieson Greer. He said Canada was ready to engage when Washington was.A senior Trump administration official, speaking to reporters during a White House-arranged conference call late Tuesday, said US and Canadian trade representatives had held “constructive conversations” and would speak again in the coming days to see if there was a “path forward.”But neither side appears keen to rush back to negotiations.Earlier Tuesday, a Canadian official said Ottawa would not change its strategy whether Trump’s response was nothing or what the official called a “nuclear response.” The government will continue focusing on building more at home and diversifying trade abroad, the official said.Former US trade official Wendy Cutler said Carney’s public approval rating, now topping 70%, gives him little reason to restart talks.“Clearly, at this point each side does not want to look too anxious to reengage in fear of looking weak,” she said.The trade dispute has now pushed the two countries into a cycle of tariffs, import restrictions and retaliatory measures, while Canada seeks to build stronger economic links beyond the US.
