Canada’s retaliatory tariffs on US goods have begun as Prime Minister Mark Carney increases economic pressure on his country’s biggest trading partner after negotiations collapsed, intensifying an 18-month-old trade war.
The counter-tariffs cover $US20 billion ($A28 billion) of US goods, with duties ranging from 15 per cent to 50 per cent across products from steel and furniture to clothing and electronics.
The dollar-for-dollar retaliation marks an escalation in the dispute between the neighbouring countries, and US and Canadian officials have traded blame for scuttling a deal that seemed close to fruition two weeks ago.
The rising tensions create uncertainty about the broader US-Mexico-Canada free trade agreement, which is up for annual reviews after US President Donald Trump declined to extend it for another decade.
“What we are worried about is an escalatory spiral,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Carney’s advisory committee on bilateral US economic relations.
“But at the same time, we totally understand that the prime minister needs to find areas of leverage,” Harvey said.
Trump’s tariffs implemented in August hit sectors including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment, covering $US20 billion ($A28 billion), or five per cent, of Canadian exports to the US
According to Canadian and US government data, Canada has shipped almost 68 per cent of total exports to the US this year, out of which roughly 80 per cent moved duty-free due to exemptions under the USMCA pact. Protections under the agreement have provided the domestic economy some resilience.
The new tariffs, imposed under a Depression-era US law, do not allow Ottawa to exercise USMCA exemptions.
Concerns about the USMCA’s future have fuelled uncertainty about investment and growth, as Canada wages a trade war against an economy 13 times its size.
Polls show Carney has broad support from Canadians, but it could disappear within months as the consequences of the trade war sink in.
Just 20 per cent of Americans approved of Trump’s tariffs on Canadian goods, a Reuters/Ipsos poll found.
Carney said last week his government was ready to sign a trade deal that benefits both countries.
Trump threatened last month to raise US tariffs on all cars, trucks and automotive parts from Canada to 50 per cent starting January 1, and signed an executive order renaming Lake Ontario as Lake America.
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