President Donald Trump has threatened to double US tariffs on cars imported from Canada, raising them from 25% to 50%, as a trade dispute between the two neighboring countries escalates.
Trump said on Monday the new rate would take effect from January 1 and would apply to Canadian cars, trucks and auto parts.
Ottawa is preparing to hit back. According to the Associated Press, a government official with knowledge of the planning, who spoke on condition of anonymity, said Canada's government is expected to unveil a new package of retaliatory tariffs on American products on Tuesday, August 25.
Trump's latest threat came just days after trade talks between Washington and Ottawa collapsed, with both sides blaming each other over last-minute demands that made a deal impossible.
Carney leaves door open to targeted retaliation
Canadian Prime Minister Mark Carney said on Monday his government might not limit its response to matching US tariffs dollar for dollar, and could instead choose measures aimed at specific sectors of the American economy.
Carney said protecting Canadian businesses and jobs from the fallout of the trade conflict would be the key factor guiding his government's decisions.
He also renewed his criticism of Washington, arguing that the conditions set by the US side were not aimed simply at reshaping trade relations between the two countries but at weakening Canada's economy and key parts of its industry.
Carney said Canada would not accept a position at the negotiating table in which it was treated as a subsidiary of the United States, signaling that Ottawa does not intend to bend to the Trump administration's demands.
Trump move called an attack on the auto industry
Carney described Trump's latest move as expected, while accusing the US president of seeking to strike directly at Canada's auto industry.
He nonetheless left open the possibility of returning to the negotiating table, saying this could happen if the United States came back with the right approach. Talks have for now been frozen, with no date set for their resumption.
Personal clash between Trump and Carney
The trade dispute between Washington and Ottawa has moved beyond tariffs, with the two leaders exchanging direct and unusually harsh accusations.
Trump turned personally on Canada, saying the country had been stealing from the United States for years. He focused mainly on Ottawa's policy on US agricultural products, describing the tariffs Canada applies as excessively high.
Carney responded by directly questioning whether the United States could still be considered a reliable trade partner, saying Canada could seek stable economic partnerships anywhere in the world except the United States.
The dispute sharpened further after trade talks broke down last Friday, when the Canadian side walked away from negotiations with the Trump administration.
Blame over collapsed talks
Canadian officials say the American side presented new terms at the eleventh hour that were judged unacceptable, including a provision that would have limited which countries Canada could sign trade deals with.
Washington offers a different account. US Trade Representative Jamieson Greer said it was Canada that tried to change the terms at the last minute, telling CNBC that the Canadians wanted more.
Trump's threat on the auto industry followed Carney's earlier announcement that Canada would respond to US tariffs with countermeasures of equal value, on a dollar-for-dollar basis.
Ontario premier's blunt response
Ontario Premier Doug Ford struck an especially sharp tone. Ontario is the heart of Canada's auto industry and is expected to face significant pressure if the new tariffs go ahead.
Responding to Trump, Ford used crude language telling the US president where he could go, and suggested Canada raise the cost for the United States of oil, natural gas, electricity and critical minerals.
Trump responded on Truth Social, accusing Ford of posturing and warning that the consequences for Canada could become far worse.
Energy remains a major factor in the standoff. According to Canadian government data, around 60% of total US crude oil imports come from Canada.
Uncertain future for USMCA
The escalation has also created uncertainty over the future of the United States-Mexico-Canada Agreement, known as USMCA, which was signed during Trump's first term as president.
Canada and Mexico have supported extending the deal for another 16 years as part of its scheduled review. The United States, by contrast, has made clear it does not want the agreement renewed in its current form.
The deal underpins roughly $1.6 trillion in trade across North America.
Economists at Oxford Economics have warned that a collapse of the trade framework could have particularly severe consequences for Canada, potentially pushing the country's economy into recession.
