Trade talks collapse, tariffs imposed

The United States and Canada failed to reach a trade agreement before a midnight Friday deadline, and the US immediately imposed 50% tariffs on $20 billion worth of Canadian goods. Prime Minister Mark Carney, in a Saturday morning address, called the new tariffs a "miscalculation" designed to "hurt and divide us," and said he walked away from a deal because he was not prepared to "compromise Canada's sovereignty."

"They asked too much and they offered too little," Carney said, announcing that Canada would match US tariffs "dollar-for-dollar" starting September 8, with levies on steel, dairy, appliances, and electronics. He said Canada was retaliating "reluctantly" and promised more details in the coming days. US President Donald Trump had not commented publicly as of Saturday morning.

Both sides accused each other of causing the breakdown. US negotiators said Canada made "new demands and walk backs" on terms agreed earlier in the week, while Canadian officials said the Americans introduced "last-minute changes" that were "unfair" and "uneconomic."

Vance audio adds friction

A leaked audio recording, reportedly captured at a private fundraiser in Southampton, New York, and shared with the Canadian Press, appears to capture US Vice President JD Vance mocking Carney's negotiating stance. Vance is heard calling Carney a "very sweet guy" but says Carney "comes in and puffs his chest out and says, 'I'm going to, like, out-tough Donald Trump.'" According to the Canadian Press, Vance also says: "It's hilarious because Carney presents this as some victory for Canada when fundamentally, like, they climb down on a lot of issues."

The audio is unlikely to help relations between the two delegations at a crucial time, and Canadian officials have expressed outrage. Manitoba Premier Wab Kinew, who confirmed Carney asked provinces to return US alcohol to shelves, encouraged Canadians to continue boycotting US products and said he respected Carney for taking on Trump. Kinew also said he believes Trump is "weak" and "about to get slaughtered in the midterms."

Background: a year of escalating tensions

Trump first threatened tariffs on Canada in early 2025, citing concerns about trafficking and fentanyl, and imposed a 25% tariff in March of that year. Canada responded with retaliatory measures. Sectoral tariffs on steel and aluminum followed, and by April Trump announced a 10% "reciprocal" tariff on all countries, though Canada was initially spared due to USMCA. In July 2025, Trump threatened and then imposed a 50% tariff on Canadian goods, escalating the trade war.

The White House said the 50% tariffs were retaliation for Canada's bans on US alcohol sales in eight of ten provinces and all three territories—a response to Trump's earlier tariffs. Canadian imports of US alcohol are down about 81% year-on-year, according to the White House.

Canada and Mexico had formally requested a 16-year renewal of USMCA, but the US declined to renew it in its current form. Carney said the collapse of talks was "certainly not good news" for the pact.

The failed negotiations

Early in the week, both sides expressed optimism. Trump announced a three-day pause on the 50% tariffs on Tuesday, saying on Truth Social that "Canada and the USA, subject to the finalization of documents, have a DEAL!" He also said the Keystone XL pipeline "may be awoken from the grave." The pipeline, plans for which were canceled under Joe Biden, would carry oil from Canada to the US.

Multiple sources told CTV News there were reductions in sectoral tariffs, such as steel and aluminum, but the scope was unknown. Sources said the details would "make or break the deal" politically for Carney. Trump told reporters on Wednesday that "we have no tariffs going into Canada anymore" and that auto tariffs were being reduced "a little bit."

Carney planned to chair a cabinet meeting and meet with premiers, with news media excluded. Canada-US Trade Minister Dominic LeBlanc said he was confident supply management would remain intact. US Ambassador to Canada Pete Hoekstra welcomed "significant progress."

But negotiations collapsed late Friday. According to a Globe and Mail editorial, final-hour US demands included restricting Canada's ability to have other trade deals, removing French-language labelling on some products, and excluding some types of trucks from a 15% auto tariff lock-in. An earlier request for a right of first refusal on critical minerals was also seen as problematic.

Carney said the US introduced, in the last hours, efforts to restrict Canada's other trade deals, calling that unacceptable. He said Canada would return to talks when American negotiators develop "the right attitude towards their industries."

Aftermath and next steps

Canada will announce retaliatory tariffs on Tuesday, according to sources told CTV. The Department of Finance said four ministers, including Finance Minister Francois-Philippe Champagne and Jobs Minister Patty Hajdu, will announce the measures. Ottawa also plans to expand Employment Insurance to help workers affected by the tariffs.

Trump, on Truth Social, pledged to increase tariffs by 50% on all cars, trucks, automotive parts, and steel from Canada starting in January, writing "WE DON'T NEED CANADA, THEY NEED US." He also said Canada will be treated like a state no longer.

Carney's government sees little chance of resuming talks before the US midterm elections, according to people familiar with the matter. Ambassador Mark Wiseman said the September 8 retaliation date is not a signal of a last-minute return to talks. US Trade Representative Jamieson Greer told Fox News that no new talks are planned. Transportation Secretary Sean Duffy called Canada "foolish."

In a poll taken since talks collapsed, three in four Canadians endorsed Carney's decision to walk away.

Perspectives

Carney government

Carney argues the deal offered by the US would have undermined Canadian sovereignty, pointing to demands that would restrict Canada's other trade deals and remove French-language labelling. He says Canada will respond with dollar-for-dollar tariffs and increased support for businesses, designed to last beyond the current US administration if necessary.

Trump administration

Trump and his officials say Canada has unfairly discriminated against US businesses, citing alcohol bans, and that tariffs are necessary to pressure Canada into a better deal. US negotiators accuse Canada of making new demands at the last minute. Trump has also suggested Canada could become the "51st state," rhetoric that has strained relations.

Critics of Carney's strategy

A Toronto Sun editorial argues that going toe-to-toe with an economy 13 times larger is unrealistic, and that counter-tariffs raise costs for Canadian consumers. The editorial notes Carney previously reversed his dollar-for-dollar approach, and that the government's $25 billion business support program has been criticized as bureaucratic. Dan Kelly, president of the Canadian Federation of Independent Business, called the rollout "garbage" and "largely useless" for many small businesses.