Canada has paused trade talks with the United States after last-minute discussions failed to secure a deal, with Prime Minister Mark Carney saying Ottawa will match the new U.S. tariffs on Canadian goods “dollar for dollar.”

The U.S. imposed additional 50% tariffs on about $20 billion of Canadian products early Saturday, heightening tensions between the two countries after negotiations broke down late Friday. The tariffs were implemented under Section 338 of the U.S. Tariff Act of 1930.

Canada had made "important progress" during the negotiations, but the final U.S. proposals fell short of Ottawa's objectives, Carney said.

Carney said the last-minute changes to the US proposed terms were unfair and uneconomic and put in doubt the reliability of any deal.

He called off the talks and sent the Canadian trade negotiators home to Ottawa.

U.S. Trade Representative Jamieson Greer, meanwhile, described the breakdown differently, saying Canada had refused to sign off on an agreement based on terms the U.S. said had been agreed to earlier in the week.

“The new demands by the Canadians and changes to previous commitments upset the balance of the proposed agreement,” Greer said.

Three-day delay in tariffs taking effect

The newest tariffs had been planned to go into effect earlier in the week. Negotiators were aiming for a deal on Aug. 18, and the U.S. agreed to delay implementation until the end of Aug. 21.

The extension expired without an agreement in place.

Other Canadian products included in the new duties are hockey equipment, cement, dairy products and clothing. The new tariffs did not include some energy, potash and critical-mineral products, which are key Canadian exports.

The measures come on top of existing U.S. tariffs on Canadian steel, aluminium, cars and timber.

The new tariffs are expected to cover about 5% of Canada’s exports to the United States, according to reports from Reuters and other news organisations.

The trade deal seemed within reach

The collapse came after days of negotiations in Washington that had raised hopes of a limited deal.

Reports on the negotiations said the two sides had discussed lowering U.S. tariffs on Canadian steel and aluminium from 50% to 25% and tariffs on Canadian automobiles from 25% to 15%.

Canada was also looking at ways to improve access for US goods, including changes to American alcohol sales and dairy-market access.

But the two governments did not formally agree to the proposed terms, and they later offered different explanations for the breakdown.

Canada readies to retaliate

The exact structure and timing of the Canadian response were not fully detailed at the time of publication, but Carney said Canada would match U.S. tariffs “dollar for dollar.”

Premier Doug Ford backed the federal government’s “tariff for tariff, dollar for dollar” reply.

Canada already has some retaliatory tariffs on U.S. products, including 25% duties on some U.S. automobiles and non-CUSMA-compliant vehicle content. Talks continued, and Ottawa has lifted many other countertariffs imposed in 2024.

Wider economic impacts

The dispute adds another dimension of uncertainty to one of the world's biggest bilateral trading relationships.

Recent reporting shows that the United States and Canada exchanged approximately $880 billion in goods and services last year. The new tariffs therefore impact a relatively small portion of overall bilateral trade, but businesses on both sides of the border have cautioned that further duties could increase costs and disrupt supply chains.

The U.S. Chamber of Commerce has warned of possible higher tariffs that could raise costs for American consumers, disrupt North American supply chains and threaten trade-dependent jobs.

The collapse also raises questions about the future of the Canada-United States-Mexico Agreement, or CUSMA, as the three nations prepare for its scheduled review.

For the moment, negotiations on Canada-U.S. trade are on hold, and no new negotiation schedule has been announced publicly.

The dispute leaves companies with higher tariff costs, and both governments are contemplating what to do next.