Canada hits back with $20 billion in tariffs as US trade talks remain frozen

Canada's retaliatory tariffs on American goods came into force just after midnight on Tuesday, marking a sharp escalation in the trade dispute between the neighbouring economies. The counter-duties, which cover $20 billion worth of US products, range from 15% to 50% and target items including steel, furniture, clothing, and electronics.

The move is a direct response to US tariffs imposed last month on a similar value of Canadian exports, such as wine, dairy, cement, and hockey equipment. Prime Minister Mark Carney's government has framed the action as a necessary measure to apply economic pressure on Canada's largest trading partner, following the collapse of negotiations last month.

The dispute has raised concerns about the future of the US-Mexico-Canada Agreement (USMCA). Washington's decision not to extend the pact for another decade has left it subject to annual reviews, creating uncertainty for businesses and investors. Canada sends nearly 68% of its exports to the US, with roughly 80% of that trade previously moving duty-free under the agreement.

Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and an advisor to Carney, acknowledged the risk of an "escalatory spiral" but said the government needs to find leverage. He urged Ottawa to keep communication channels open and avoid reacting too strongly to American rhetoric.

Public opinion in Canada appears to back Carney's stance, though analysts warn that support could fade as the economic consequences become clearer. In the US, only 20% of Americans approve of the tariffs on Canadian goods, according to a recent poll.

Carney has said his government remains ready to sign a mutually beneficial deal. However, a government source indicated that no ministerial or official-level talks are currently underway between the two sides.