US-Canada trade war deepens, raising costs on both sides

Canada is set to announce its response on Tuesday to new tariffs imposed by US President Donald Trump, as the two neighbors and former close allies become embroiled in a trade war.

The Canadian government said late on Monday that the ministers of finance, industry and labor, along with other senior officials, would hold a press conference in Ottawa to outline Canada's response to "these challenging times."

Trump said on Monday that tariffs on Canadian cars, trucks and auto parts would rise from 25% to 50% starting January 1, 2027.

A 50% US tariff on $20 billion worth of Canadian goods, including hockey sticks and cement, took effect just after midnight on Saturday, after extended trade negotiations collapsed. Canadian Prime Minister Mark Carney earlier said retaliatory tariffs would take effect starting September 8 on US imports like steel, dairy, appliances, agricultural equipment, paper and electronics.

Carney said on Monday that Ottawa would be willing to talk if Washington changed tack. "When the Americans go to the negotiating table first, with the right attitude toward our industries and in a true partnership, of course we'll come to the negotiating table," he said.

He added that he would not accept the attitude that "Canada is a subsidiary of the United States," or that the country should be disadvantaged relative to the US.

'Enough is enough'

Other Canadian political leaders joined Carney and stepped up their rhetoric on Monday in response to the latest US tariff threats.

Finance Minister Francois-Philippe Champagne urged a firm stance during consultations in Montreal. "At some point you have to say enough is enough," Champagne said, indicating that federal support is on the way for businesses hit by 50% tariffs.

Champagne emphasized ongoing work to build a resilient economy, stating, "Plan A has always been to build a strong Canadian economy, to remove interprovincial trade barriers, to diversify our economy and to do big things in our country."

Former Prime Minister Jean Chretien urged Ottawa to hit back with export taxes on critical commodities such as energy, oil, natural gas and potash. "If we want to stay upright, we have to hit where it hurts," Chretien said. "That's where we should tax. The advantage of an export tax is it's not us who pays, it's the Americans."

Ontario Premier Doug Ford also took an assertive stance, calling for all available countermeasures to be deployed. Ford warned that Canada must be ready to cut off electricity and critical mineral exports to the United States if trade relations worsen.

"I'll cut them off," Ford said regarding mineral shipments. "You won't get a grain of sand out of Ontario."

Economic interdependence

Public opinion appears to be backing Ottawa's tougher stance, even as concerns over the economic fallout grow.

Three in four Canadians support the Carney government's decision to walk away from trade talks, according to a poll released on Sunday by the Angus Reid Institute. Meanwhile, two in five Canadians said they feared for their jobs.

Those concerns reflect economic interdependence between Canada and the US. Canadian exports to the US account for about 70% of the country's total exports, while Canada is the US' second-largest goods trading partner this year and its largest foreign supplier of energy, according to Canadian government data.

Canada supplies the vast majority of US natural gas and electricity imports, as well as about 60% of US crude oil imports, Carney said.

"I don't think they want us to stop sending any of that energy," he said.

Canada is also a major supplier of commodities such as potash, for which it is the world's largest producer, as well as critical minerals including lithium, nickel and graphite.

The auto industry is particularly important to Ontario, the center of Canada's vehicle manufacturing sector. Automakers and suppliers on both sides of the border are deeply integrated, with auto parts routinely crossing the US-Canada border multiple times during production.

Ford, General Motors and Stellantis operate major assembly plants in Ontario, while the broader supply chain supports tens of thousands of jobs.

No winners in trade war

The growing tariff confrontation is likely to hurt businesses and consumers in both countries, experts say, as higher tariffs raise production costs and ultimately push up prices.

British Columbia Premier David Eby told CNN on Monday that US consumers would feel the impact across a wide range of products, from plywood and flooring materials to cut flowers and fishing equipment.

"It is a bizarre policy for Americans. It's going to hurt them," he said.

Trade policy analyst Deborah Elms from the Hinrich Foundation told CNA that ultimately, nobody wins in a tit-for-tat tariff war.

"Canadian tariffs will be paid by Americans and American companies importing from Canada. So, they're going to hit Americans rather than Canadians," she said.

"And Canada will have a much harder time exporting to the US at 50% tariffs. That completely ruins profit margins. If Canada retaliates, (there'll be) additional pain on Canadians who are trying to import goods from the US," Elms said.

(With input from agencies)