Canada, US and tit-for-tat tariffs: How will they impact their economies?

Published On 23 Aug 202623 Aug 2026.

Key points

• The 50 percent levy on roughly $20bn of Canadian goods covers more than 500 product categories, including.
• Most of Canadian exports – a whopping 73 percent – are sold in the US, totalling $409bn last year, according to the financial data firm Trading Economics.
• Still, with 5 percent of Canadian exports affected out of a $382bn market, he continued, "it's not a huge hit to the Canadian economy overall."
• Diamond Isinger, who served as a special adviser to former Canadian Prime Minister Justin Trudeau, remarked ultimately both countries will suffer from the trade war.
• Unemployment is going to go up as well, Al Jazeera's David Mercer remarked, reporting from Calgary, the largest city in the western province of Alberta.

Canadian Prime Minister Mark Carney has confirmed retaliatory tariffs that will "match Washington's new tariffs dollar for dollar" after days of intense negotiations between the United States and Canada broke down.

In practice, the tit-for-tat response came after US President Donald Trump imposed a 50 percent levy on $20bn of Canadian goods, or 5.5 percent of its exports, disrupting the long history of stable relations between the two North American neighbours.

Trump first imposed tariffs on key imports from Canada early in his second term last year. The two countries have scuffled since with Trump periodically making new tariff threats.

So what prompted this latest escalation, and how will it impact the two Western economies? How did discussions break down?

In Ottawa on Saturday, Carney remarked the negotiations with the US broke down late the day before after Trump set conditions that were ultimately unacceptable.

"In recent days, the United States proposed new terms that were uneconomic, unfair and undermined the net benefits for Canada, and called into question the reliability of any deal, " Carney remarked, adding that these demands included curtailing Canada's ability to forge new trade deals, in violation of its sovereignty.

"We're the partner of choice in plenty of respects for countries worldwide, and the Americans wanted to restrict that. They had language that wanted to restrict that. Unacceptable."

He continued that US negotiators additionally created unacceptable "threats" to the French language and "Quebec culture", referring to the French-speaking province in eastern Canada.

In a speech afterwards in the day, Carney suggested that last-minute changes at the bargaining table had prompted him to recall his negotiators from Washington, DC, to Ottawa. "In short, they asked too much, and they offered too little."

Trump responded to Carney's announcement by writing on his platform Truth Social: "Canada wants the benefits of being a State, without being one!" Trump has previously issued threats to annex Canada and create it the 51st US state.

Meanwhile, the US president asserted Canada has additionally charged US farmers "massive amounts" of tariffs for years, adding, "No more!" What Canadian products will be affected by the US tariffs?

Notably, the list of goods from Canada that will be affected is long, ranging from whisky to goose-down jackets and ice hockey equipment.

For context, the 50 percent levy on roughly $20bn of Canadian goods covers more than 500 product categories, including.

Alcohol, such as beer, wine, liquor and cider. They will probable hit popular Canadian brands from Crown Royal whisky to Molson beer.

Dairy products from milk and cream to lactose syrup. Cheese, nevertheless, is not on the list even though Trump stated a reason for the tariffs is Canada's "discrimination" against US cheeses, The Washington Post documented. Technology from smartphones to cameras, radar equipment and antennae.

Athletic gear, notably equipment for hockey, one of two of Canada's national sports. Other sports supplies targeted include those applied in golf, at gyms and in swimming pools. Wood products, including lumber, mouldings, plywood, furniture and fence components.

Seasonal holiday products and gifts, including toys, clothing, Christmas decorations, jewellery, makeup and perfumes.

In practice, the tariffs additionally apply to some products that were previously protected under the US-Mexico-Canada Agreement, a trade pact signed during Trump's first term, putting its future into question.

Meanwhile, the new tariffs are being imposed along with pre-existing US tariffs on steel, lumber and cars. What American products will be affected by Canadian tariffs?

Ottawa, meanwhile, remarked its retaliatory measures beginning on September 8 will target steel, dairy, appliances, farm equipment, pulp and paper, and electronics.

Notably, the Canadian administration will release more details on the items to be targeted over the next few days, Carney stated. How will the trade war affect Canada's economy?

Canada's economy is projected to face a sizeable blow from the tariffs, some experts noted.

"Costs are going to go up. Rates are going to go up. Unemployment is going to go up as well, " Al Jazeera's David Mercer remarked, reporting from Calgary, the largest city in the western province of Alberta.

"And it's been warned that business owners – small medium-sized businesses – some of those will have to declare bankruptcy, " he remarked.

Julian Karaguesian, a lecturer and trade expert at McGill University in Montreal, informed Al Jazeera the tariffs would "effectively price hundreds of Canadian goods out of the US market".

Key industries that are "important and politically influential", including the alcohol, dairy and furniture industries, will take the biggest hit, Steven Okun, the CEO of APAC Advisors and a trade specialist, informed Al Jazeera.

Meanwhile, Mercer remarked, Carney is selling the trade war as an opportunity for Canada to strengthen its trade relations with other countries.

"He's been worldwide. He's been talking to countries in Asia, in Europe, shoring up new trade relationships, wanting to diversify Canada's economy and Canada's trade relationships with other countries worldwide just to obtain away from that dependency that Canada has traditionally had on the United States, " he stated.

Nevertheless, that's a tall order. Most of Canadian exports – a whopping 73 percent – are sold in the US, totalling $409bn last year, according to the financial data firm Trading Economics.

For context, the United Kingdom is next with 6 percent of Canadian exports going there while 4.4 percent of Canadian exports head to China, according to 2025 data cited by the firm, with the rest sold in various European and Asian markets. How will the trade war affect the US economy?

Experts cautioned that steeper tariffs not only raise costs for businesses but they almost always trickle down to households in the form of higher costs, including in the US.

For context, the Business Roundtable, a group of 200 chief executives of leading US corporations, cautioned that the new tariffs "risk raising costs for American businesses and families" and have called on both governments to resume negotiations.

Okun remarked the latest tariffs will be "politically painful" on both sides of the border.

As he noted they would, and instead have caused inflation by raising costs, Okun explained, trump's measures have neither rose trade for the US nor led to an rise in investment.

Having a blanket tariff policy does not work, unlike targeted tariffs, he remarked.

"Targeted tariffs can work. They can work when you have a particularly specific problem like with China and their unfair trade practices and you target China. In a particular sector. Those can be effective, " he remarked.

"These writ-large tariffs are not effective. They're hurting the United States, and it is particularly much hurting the Republican Party as they come up on these midterm elections" in November.

Taken together, the developments around canada, US and tit-for-tat tariffs: How will they impact their economies? Point to a situation that is still moving, and the coming days should bring more clarity.