'Collapse of an alliance': US and Canada descend into tit-for-tat trade war

US President Donald Trump (left) and Canadian Prime Minister Mark Carney. [AFP]

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Once celebrated as the closest of allies — bound by deep defense and security cooperation and a commitment to free trade — the United States and Canada have descended into a full-blown trade war, exchanging retaliatory tariffs in a dispute that has shaken one of the world's most enduring partnerships.

The two governments negotiated until the final hours and came close to a deal, but failed to bridge key differences and talks collapsed. Analysts say the breakdown reflects more than a tariff dispute: the political and economic tensions that have accumulated since the start of Donald Trump's second administration have opened a rift between the two countries that may prove very difficult to repair.

Hockey sticks on display at a store in Montreal, Quebec, Canada, on Sunday. [AFP]

The Trump administration imposed 50 percent tariffs on roughly $20 billion worth of Canadian imports beginning at midnight Saturday. The targeted goods include certain dairy products, alcoholic beverages such as beer and wine, hockey equipment, machinery, textiles, cement and furniture.

Canadian Prime Minister Mark Carney fired back, announcing retaliatory tariffs of equal scale on American steel, dairy products, home appliances, agricultural machinery and pulp, to take effect Sept. 8. "When you are attacked, a war begins — and we were attacked," Carney said, declaring a hard-line response. He said the United States had "asked for too much and offered too little."

The two sides had made substantial progress in negotiations until the very end. But the deal fell apart after pushback from parts of the US industry and hawkish figures within the Trump administration, including Commerce Secretary Howard Lutnick, according to reports.

The Wall Street Journal reported Sunday that the two countries had initially agreed to cut steel and aluminum tariffs from 50 percent to 25 percent, and auto tariffs from 25 percent to 15 percent. The US aluminum industry then threw a wrench into the agreement, insisting that while tariffs on raw aluminum could be lowered, the 50 percent rate should be maintained on processed aluminum products.

US Commerce Secretary Howard Lutnick speaks at a roundtable on the American mining industry held at the Department of State in Washington on Aug. 7. [AFP]

Lutnick sided with the industry, taking a hard line on sector-specific tariffs, according to reports.

Auto tariffs were another sticking point. Canada had asked the United States to extend tariff rebate benefits — currently available only for American-made parts — to all North American parts, but Washington refused. Tensions escalated further when the US side moved late in the talks to exclude medium- and heavy-duty trucks from tariff relief, according to reports.

Canada's objections went beyond the tariffs themselves. Carney said the United States had pushed, at the last minute, for conditions that would weaken Canada's protections for its French-language culture and restrict its ability to negotiate trade deals with other countries. "This is a power struggle, and it is a matter of sovereignty," he said.

The collapse of the talks reflects where the two countries now stand after years of accumulated grievances.

The United States and Canada share the world's longest land border and have long been bound by deeply integrated North American supply chains. Because businesses and industries on both sides have built their operations across that border, the tariff conflict threatens to spread well beyond steel and automobiles to affect both economies broadly.

Trump has not limited himself to tariffs. He has repeatedly suggested that Canada should become the 51st state of the United States, and has made remarks implying that Canada owes its existence to America.

Those comments have fueled a surge of anti-American sentiment in Canada. Boycotts of US travel and American products have taken hold, and a petition campaign calling for the expulsion of the US ambassador has gained traction. Since taking office in March last year, Carney has consistently called for reducing Canada's dependence on the United States and diversifying its economy.

Canadian Prime Minister Mark Carney addresses reporters in Ottawa, Ontario, on Saturday, after breaking off trade negotiations with the United States. [Reuters]

Carney, a former central bank governor, argued at the World Economic Forum in Davos, Switzerland, in January that the United States can no longer be counted on to guarantee global stability, and called on middle powers like Canada to unite and reduce their vulnerability to economic pressure.

On Saturday, Carney said he had understood "earlier than others" that the United States would "reshape all commercial relationships, impose tariffs on its closest allies and use economic integration as a weapon." He added that he had recognized that "America's signature was written in pencil" — meaning it could be erased at any time.

Shipping containers at the Port of Montreal in Montreal, Quebec, Canada, on Sunday. [AFP]

Carney's refusal to accept what he has called a bad deal has drawn broad support within Canada.

A recent poll by Leger Marketing found that 56 percent of Canadian adults said they want the government to "take a hard line and make no further concessions to the United States."

Saskatchewan Premier Scott Moe said "the status quo is no longer possible," while former Alberta Premier Jason Kenney backed Carney, saying he would not "cowardly surrender in the face of relentless political and economic pressure."

The New York Times wrote that Carney had "chosen a path no other major US ally has taken" by walking away from the negotiations, while the Associated Press said the trade war was "further fracturing what was once a close and solid alliance."

Daniel Béland, a professor at McGill University in Canada, told the AP that the breakdown in tariff talks "suggests the old Canada-US relationship is over," adding that it had "confirmed for many Canadians that the Trump administration cannot be trusted."

US President Donald Trump and Canadian Prime Minister Mark Carney hold a bilateral meeting on the sidelines of the G7 summit in Kananaskis, Alberta, last year. [Getty Images]

Washington is not backing down.

Trump wrote on Truth Social that Canada "wants the benefits of being a state, without actually being a state," adding: "They have been charging our great farmers massive tariffs for a long time. No more."

US Trade Representative Jamieson Greer said Saturday that the administration was "pursuing measures in response to Canada's retaliation" and that no new talks with Canada were scheduled.

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