Trade talks collapse as US tariffs take effect

A fresh wave of US tariffs on a wide range of Canadian goods came into effect at 12:01 a.m. EDT Saturday after last-minute trade talks broke down. The new 50% duties apply to products including wine, dairy, cement, clothing, hockey equipment, furniture and related goods. According to Oxford Economics, the tariffs target about 5.5% of Canada's exports to the United States, worth roughly $20 billion.

Canadian Prime Minister Mark Carney announced the suspension of negotiations shortly before the Friday night deadline, saying he would impose reciprocal tariffs on US goods "dollar for dollar." Carney cited "last-minute changes in the US proposed terms" that were "unfair, uneconomic, and called into question the reliability of any deal."

US Trade Representative Jamieson Greer blamed Canada for the breakdown. In a statement, Greer said: "Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week." He further told CNBC on Monday that the two sides had enough agreement Tuesday night to announce they had found a path to a deal, but then "in the last hours, I think there were things that the Canadians just — you know, they wanted more."

Terms of a potential deal

Negotiators had been in intense talks since July, after President Donald Trump threatened new 50% duties on nearly $20 billion of Canadian imports. Trump had temporarily paused the tariffs earlier in the week, saying the two sides were close to signing a deal that was "very good" for both countries. Reuters reported that a potential deal would reduce US tariffs on Canadian-made vehicles from 25% to 15% and halve duties on steel and aluminum to 25%.

In exchange, Carney had asked provinces to restore US alcohol to store shelves, lifting boycotts imposed earlier as a retaliatory measure. Canada's trade minister Dominic LeBlanc said late Friday that talks were ongoing and "more work" was needed, while President Donald Trump said the US "should be able to have a deal with Canada."

Sticking points and red lines

Several contentious issues led to the breakdown. According to an anonymous senior government source, Washington introduced an 11th-hour demand for exemptions to Canadian requirements that foreign streaming platforms, such as Netflix and Amazon Prime Video, promote Canadian content, including French-language content. The source said this demand, which would have meant "more content from the U.S. and less Canadian content available on these platforms," was considered a red line.

Carney said Canada would not compromise on sovereignty, protection of the French language, or Canadian culture. He also cited problems including auto tariff levels, which vehicle types would be excluded, and how much Canadian content could be included. The prime minister said the US offer to reduce auto tariffs to 15% would have applied only to light vehicles and excluded mid- and heavy-duty trucks, such as Ford F-350/450/550 and GM Silverado.

Additionally, Carney accused the US of introducing last-minute efforts to restrict Canada's ability to strike free trade deals with other countries.

Domestic reaction and economic impact

Carney said Canada is walking away from a "bad deal" and that the US "asked too much and offered too little." He acknowledged the retaliation would add costs for Canadians but insisted it was necessary. Retaliatory tariffs are set to take effect on September 8, targeting sectors like steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Conservative Leader Pierre Poilievre expressed disappointment at the new US tariffs and called for unity, saying "Canada must stand united to defend our country against these unfair attacks on our jobs and our businesses." He said Canada cannot accept one-sided tariffs that will deindustrialize the country, nor sign a bad deal.

Economists warned of economic fallout. University of Calgary economics professor Trevor Tombe estimated that about 90,000 jobs, roughly 0.4% of Canada's labour force, could be lost if the tariffs persist. Desjardins deputy chief economist Randall Bartlett warned the breakdown could cut 0.2 and 0.3 percentage points from growth this year and next, respectively. Oxford Economics said the duties would "affect central Canada's manufacturing sector much more severely."

Perspectives

Canadian government: Prime Minister Mark Carney defended the decision to walk away, calling the US demands "unfair" and "uneconomic" and vowing to defend Canada's sovereignty, culture, and the French language. He said Canada was attacked and will respond "dollar for dollar."

US Trade Representative: Jamieson Greer blamed Canada for the collapse, saying Canada declined to finalize the deal under terms agreed earlier in the week. He accused Canada of making "new demands and walk backs" and said there are no new talks planned.

Provincial and business leaders: Ontario Premier Doug Ford expressed full support for Carney's tariff-for-tariff response, and Manitoba Premier Rob Kinew also backed the decision. However, some experts cautioned about economic costs, with B.C. Chamber of Commerce president Riley saying job losses are inevitable and small businesses in the province will bear a disproportionate burden.