Canada’s retaliatory tariffs set to take effect as Trump threatens to escalate

OTTAWA, Ontario — After more than two weeks of finger-pointing, threats, and patronizing insults between longtime trading partners, Canada’s latest retaliatory tariffs against the United States are set to take effect just after midnight Eastern time Tuesday.

Polls show that Canadians strongly back Prime Minister Mark Carney’s decision to end trade talks with Washington last month and to hit back with tariffs on about $20 billion in U.S. products entering Canada. But there is also concern over what might happen next. President Donald Trump has repeatedly threatened another round of U.S. tariffs if Canada follows through on its plan.

Some in Canadian industry say they are inclined to take Trump at his word, at least on this threat.

People in the Trump administration “are willing to hurt themselves, their own sectors and industries, in pursuit of their goal, however misguided I think it is,” said Flavio Volpe, president of the Automotive Parts Manufacturers’​ Association of Canada. “So they may escalate. I hope that we don’t end up in a tit-for-tat situation. We’re going to run out of runway.”

Carney announced Canada’s new tariffs after he pulled Canadian negotiators out of talks in Washington last month — an ultimately unsuccessful attempt to stave off 50% U.S. tariffs on $20 billion in Canadian exports and to reduce or eliminate tariffs of up to 50% on Canadian steel, aluminum, and automobiles.

The Trump administration said the tariffs it imposed last month were in part a response to retaliatory tariffs Canada placed last year on some U.S. imports, particularly autos. U.S. officials have repeatedly noted that only China and Canada retaliated against the United States since Trump began upending global trade.

At a news conference after a sternly worded speech announcing the tariffs, Carney declared that Canada had been attacked by the United States and that the two countries are now “at war.”

Last week, U.S. Treasury Secretary Scott Bessent rejected that framing, arguing that Canada is too small an economic power to battle the United States. “I don’t think you can be in a tit-for-tat with someone who’s 13 times larger than you are,” Bessent said on CNBC.

On Friday, Trump escalated his trade rhetoric even further. He said that he might “end all trade with Canada” and other countries that have trade surpluses with the United States.

Separately, U.S. Commerce Secretary Howard Lutnick said Carney had shut down the talks to gain “political leverage” at home, not because of what the U.S. side had offered.

As last week went on, Carney made it clear that he was in no hurry to return to negotiations and was focused instead on diversifying Canada’s trade and expanding its domestic economy.

“At the appropriate time, the conversation will happen,” he said. “But the most important thing we can do is not to spend all our time waiting by the phone, waiting for a call, refreshing on social media to see what’s coming across.”

Many of the U.S. items that will soon face Canadian tariffs of 15%, 25%, or 50% mirror the Canadian exports that are now met with 50% U.S. tariffs, particularly clothing and wood products. Canada revised the list to remove dozens of fish products after the Canadian fishing industry said that tight cross-border integration meant that its members would also be harmed.

Canadian officials have suggested that many targeted items come from states where voters supported Trump, though some political analysts question how much pressure that will actually bring on the White House. The list also includes items with little bearing on the Canadian economy, including the metal bands that attach erasers to pencils, migratory bird identification bands, and fish egg incubators.

Trump has not imposed tariffs on some of Canada’s largest exports, including oil and gas and many minerals, and has exempted many products with enough North American content to move duty-free under the United States-Mexico-Canada Agreement. Auto parts, for example, are subject to a 25% tariff but generally cross the border without incurring it.

As a result, Canada’s overall average tariff rate remains low compared with what most other countries face, and the majority of its trade, by dollar value, is still duty-free.

After the talks collapsed, Trump threatened to impose 50% tariffs on autos and auto parts in January, apparently without the USMCA exemption — a move most analysts believe would be devastating for Canada’s auto industry. Trump has not taken formal steps toward carrying out the threat, though some in Canada speculate that rather than target new products or raise existing tariff rates, the Trump administration may instead strip away the USMCA exemption for many goods.

Volpe said that auto parts makers were not intimidated. He said that last year when the Trump administration proposed collecting tariffs on Canadian auto parts “they understood that it would shut down the auto industry in a week.”

He added: “Ultimately, I think they will back off that. But if they don’t, they can have at it.”

This article originally appeared in the New York Times.