Canada braces for prolonged trade war as counter-tariffs on US take effect

ByNadine Yousif Senior Canada reporter.

Key points

• Canada and the US have the world's largest bilateral trading relationship valued at almost $900bn in 2025.
• But around 41, 000 jobs were lost in August, a period that coincided with the new US tariffs on Canada and the collapse in trade discussions.
• President Donald Trump threatened on Monday to halt all US business with Canada-based airplane maker Bombardier unless it moved its manufacturing south.
• Another post indicated a map of North America – including Canada and Mexico – and Greenland all overlaid with the US flag.
• Trump took aim at Canada in a series of other Truth Social posts over the weekend, including one that called Canada's exchange rate with the US "unacceptable".

Canada's retaliatory tariffs on a range of US goods came into effect on Tuesday, with no sign of a trade accord on the horizon.

For context, the counter-tariffs will apply to almost C$28bn ($20bn; £15bn) worth of American products, from steel to furniture to cotton T-shirts, and will be as high as 50%.

Fresh fish and lobster were additionally on the list, but Canada afterwards omitted them after pushback from its seafood industry – a sign of the tricky balance it has to strike as it retaliates against its largest trading partner.

Both US and Canadian authorities have stated they would like to strike a accord, but no movement has been produced to resume discussions after they collapsed in late August.

Speaking to reporters last week, Prime Minister Mark Carney remarked that Canada is still in search of a agreement with the US that is "durable" and in the best interests of both countries.

"We're ready to sit down and and strike that deal when the Americans are ready, " Carney remarked.

US trade representative Jamieson Greer, meanwhile, remarked on Thursday that the ball is in Canada's court.

"We offered them the best deal, they looked at it square in the face and turned around, " Greer remarked in an interview with Fox News, adding that there has been sparse communication with the Canadians since negotiations collapsed.

In a separate interview with Canadian broadcaster CBC, Greer cautioned against retaliation and suggested the US might hit back by banning the import of some Canadian products.

In practice, the firm is one of the largest in the country, contributing over C$7bn to Canada's annual GDP in 2024, according to a report commissioned by Bombarier by public accounting firm PwC. What tariffs will really cost Canadians and Americans. The US-Canada trade war in 5 charts.

With new US tariffs and Canadian counter-tariffs are now in effect, businesses on both side are scrambling to accord with what comes next.

As well as taxes on Canadian steel, aluminium and lumber, the US at present has in place a 25% tax on Canadian cars and trucks. In late August, President Donald Trump imposed new 50% tariffs on other goods like dairy, alcohol, hockey sticks and perfume.

Canada's counter-tariffs, which were described by Carney as "dollar-for-dollar", will be applied to hundreds of items coming in from the US as of midnight on Tuesday.

They are along with existing retaliatory taxes Canada had placed on finished American cars and trucks that are non-compliant with a free trade agreement between Canada, the US and Mexico, known as the USMCA in the US and CUSMA in Canada.

Polls suggest most of Canadians backing, external their country imposing retaliatory tariffs on the US.

But economists warn that the latest counter-tariffs will raise rates for consumers, external on everyday goods like clothing, food and furniture.

In practice, the Canadian Chamber of Commerce has additionally called on the Carney administration to take a surgical approach to retaliation.

Though she went on that businesses "are preparing for this trade dispute to last", "Businesses understand retaliation but don't want to see endless escalation, " remarked the Chamber's CEO and President Candace Laing in an official note to the BBC on Friday.

Pushback from the fisheries industry was enough for Canada to alter its counter-tariffs by removing dozens of seafood items to avoid unintended consequences to its own economy.

In practice, the lobster industry in both Canada and the US are heavily dependent on the other, with American-caught lobster often sent to north to be processed before it is shipped back to the US and sold.

Ahead of the latest tariffs, Canada's economy had shown signs of resliency. Its GDP grew 3.3% in the second quarter and it had gained 181, 000 jobs from April to July.

One sector that saw a modest bump was manufacturing – a gain the Canadian administration attributes to consumers and businesses buying more made-in-Canada products.

Prime Minister Carney has vowed to diversify Canada's trade away from the US. July figures show the share of US-bound Canadian exports dropped to 66% from an average of 75% before the trade war.

For now, canada braces for prolonged trade war as counter remains the part of the story worth watching, and further updates are likely as more details are confirmed.