Canada Set To Hit US With Retaliatory Tariffs As Trade War Deepens

Canada is set to announce retaliatory tariffs against the United States on Tuesday after trade tensions between the two countries escalated sharply, with US President Donald Trump threatening to impose 50% tariffs on Canadian automobiles, auto parts and steel from January 2027.

Canadian Prime Minister Mark Carney has rejected Washington's demands, accusing the US of seeking to subordinate Canada and warning that the measures could damage major Canadian industries.

According to AP, Carney said Canada's response would not necessarily involve matching US tariffs dollar for dollar. Instead, Ottawa is considering targeted measures aimed at protecting Canadian workers and businesses.

Finance Minister François-Philippe Champagne and three other Cabinet ministers are expected to announce Canada's response on Tuesday morning.

Trump Threatens 50% Tariffs From 2027

Trump announced the planned tariff increases on Monday in a post on Truth Social, arguing that Canada had imposed unfair tariffs on US agricultural products and contributed to a large US trade deficit.

"On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%," Trump said.

He added that vehicles and other products built in the US would face zero tariffs, while warning Canada that it would no longer be treated as a special trading partner.

Trump's latest announcement came after negotiations between Washington and Ottawa broke down late last week. Canada had been seeking a trade agreement with the US, but Carney said American demands ultimately made the proposed deal unacceptable.

The US had also announced a 50% tariff on about $20 billion worth of Canadian goods after the negotiations fell through.

Carney Rejects US Pressure

Carney has pushed back against Trump's increasingly aggressive approach, saying Canada would not accept a negotiating position in which it was treated as subordinate to the US.

"An attitude at the negotiation table that Canada is a subsidiary of the United States" is "not something we're going to accept," Carney said.

He also accused Washington of seeking to "destroy our major industries", including autos, steel and aluminium.

The Canadian prime minister said Ottawa had learned during the negotiations that the US was seeking terms that would put significant pressure on Canada's industrial base.

Ontario Premier Doug Ford has also warned of a stronger Canadian response if Washington continues targeting key sectors.

Ford said Ontario could consider measures including increasing electricity prices or halting power exports to the US, while dismissing Trump's personal criticism of him.

"If you think an insult from him hurts me? Well, bring it on, buddy, I'm ready," Ford wrote.

Trade War Threatens Integrated Supply Chains

The escalation threatens one of the world's largest and most closely integrated trading relationships.

The US and Canada have deeply connected supply chains across automobiles, energy, agriculture, steel and manufacturing. The auto industry in particular relies heavily on cross-border movement of vehicles and components.

Higher tariffs could therefore raise costs for businesses operating across both countries and disrupt supply chains that have developed around decades of integrated trade.

Carney has indicated that Canada wants to move away from simply matching US tariffs and instead use targeted measures to protect domestic industries.

The latest escalation also marks a sharp deterioration in relations between two countries that have historically maintained close economic and political ties.

With Canada preparing its response and the US threatening further tariffs, businesses on both sides of the border now face renewed uncertainty over the future of cross-border trade.