Canada Hits Back as Trade War With U.S. Deepens

The line snaps

Tuesday morning the duties landed. Canada’s retaliatory tariffs on a range of U.S. goods came into effect, nearly C$28bn, about $20bn, worth of American products, from steel to furniture to cotton T-shirts, with rates as high as 50 percent. Fresh fish and lobster had been on the list until Canadian officials pulled them back after pushback from the seafood industry, a sign of the tricky balance Ottawa is trying to strike as it retaliates against its largest trading partner.

The move was meant to mimic the taxes President Trump imposed on Canada after trade talks collapsed in acrimony last month. Prime Minister Mark Carney has positioned himself as a bulwark against what he calls trade aggression, describing his nation as “at war.” Canadian officials have pledged to respond “dollar for dollar” to any U.S. duties.

In Washington, the president and his aides have mocked Canadian counterparts and the size of their ally’s economy. Hours before Canada’s new tariffs took effect, Trump took to social media to continue his attack, singling out Bombardier, a Canadian plane manufacturer, claiming there would be “NO MORE SELLING BOMBARDIER IN THE UNITED STATES!” The post came as businesses on both sides scrambled to deal with what comes next.

The U.S. currently has in place a 25 percent tax on Canadian cars and trucks, as well as taxes on Canadian steel, aluminium and lumber. In late August, Trump imposed new 50 percent tariffs on other goods like dairy, alcohol, hockey sticks and perfume. Canada’s counter-tariffs, described by Carney as “dollar-for-dollar,” will be applied to hundreds of items and are in addition to existing retaliatory taxes Canada had placed on finished American cars and trucks that are non-compliant with the North American trade agreement.

For now the economic effects may be limited because the tariffs encompass only a small portion of the annual trade between the United States and Canada, which have the world’s largest bilateral trading relationship valued at nearly $900bn in 2025. The more pressing concern is a potential cycle of retaliation, one that results in even higher and more exhaustive duties that harm families and businesses on both sides of the border.

A dollar-for-dollar answer

Carney has said Canada is still in search of a deal with the U.S. that is “durable” and in the best interests of both countries. “We’re ready to sit down and and strike that deal when the Americans are ready,” he said last week.

U.S. Trade Representative Jamieson Greer said the ball is in Canada’s court. “We offered them the best deal, they looked at it square in the face and turned around,” Greer said in an interview with Fox News, adding that there has been sparse communication with the Canadians since talks collapsed. In a separate interview with CBC, Greer cautioned against retaliation and suggested the U.S. might hit back by banning the import of some Canadian products.

Polls suggest the majority of Canadians support retaliatory tariffs on the U.S. But economists warn the latest counter-tariffs will raise prices for consumers on everyday goods like clothing, food and furniture. The Canadian Chamber of Commerce has urged the Carney government to take a surgical approach to retaliation. “Businesses understand retaliation but don’t want to see endless escalation,” said the chamber’s CEO and President Candace Laing, adding that businesses “are preparing for this trade dispute to last.”

Ahead of the latest tariffs, Canada’s economy had shown signs of resilience. Its GDP grew 3.3 percent in the second quarter and it had gained 181,000 jobs from April to July. Then around 41,000 jobs were lost in August, a period that coincided with new U.S. tariffs on Canada and the collapse in trade talks. One sector saw a modest bump in manufacturing, a gain the Canadian government attributes to consumers and businesses buying more made-in-Canada products.

Carney has vowed to diversify Canada’s trade away from the U.S. July figures show the share of U.S.-bound Canadian exports dropped to 66 percent from an average of 75 percent before the trade war.

Trade talks between Canada and the U.S. collapsed late last month after Canada walked away from the negotiating table, after which the U.S. imposed new 50 percent tariffs on a range of Canadian goods. Prime Minister Carney accused the Trump administration of presenting last-minute terms that were “unfair” and “uneconomic,” while U.S. officials accused him of refusing to sign a deal for political reasons because of Trump’s unpopularity in Canada — an accusation he denied.

The backdoor rumor

The tariff fight is layered with an older accusation about steel. In the fall and summer of 2026, social media users claimed Canada resold Chinese steel as Canadian to help China avoid U.S. tariffs. U.S. businesses and the U.S. government have accused Canadian companies of acting as a “backdoor” funneling Chinese products into the United States. President Trump’s administration has accused Canada of being one of China’s “biggest enablers” in efforts to avoid tariffs in general through transshipment.

In May, the Department of Justice reached a $19 million settlement with two Canadian companies accused of falsely labeling Chinese steel as Canadian to avoid customs duties. The companies did not admit fault as part of the settlement. Some trade experts have expressed skepticism that Canada is enabling Chinese efforts to avoid tariffs on steel, and Canada’s government has enacted measures in an attempt to prevent Chinese steel from flooding the Canadian market.

In December 2025, American industry leaders accused Canadian and Mexican firms of using cheap Chinese materials in ways that undercut U.S. businesses during a public hearing on the future of the U.S.-Mexico-Canada trade agreement. Brandon Farris, vice president of the Steel Manufacturers Association, said some producers of steel-intensive goods in both countries continue to rely on steel sourced from non-market, excess capacity nations such as China. From 2020 to 2024, Mexico’s steel imports from China rose by 59 percent, while Canada’s increased by nearly 75 percent.

Michael Salmon, CEO of Specialty Steel Works in Indiana, said “China in particular continues to use Mexico as back door access to key U.S. markets, including steel.” Bob Wahlin, CEO of Stoughton Trailers, said the United States must “close loopholes in the agreement” allowing “highly subsidized” Chinese steel to “enter the U.S. market from Canada and Mexico.”

The best publicly available evidence that at least some Canadian firms may be skirting tariffs appears to be the Justice Department settlement with Farjess and Royal Canadian Steel. According to the Justice Department’s complaint, the same people oversee Royal Canadian Steel and Farjess. Royal Canadian Steel imported steel into Canada and supplied that steel to Farjess. The DOJ alleged that Farjess and/or Royal Canadian Steel personnel removed labels on steel referencing a Chinese company in order to conceal the origin of the steel from customs officials.

As of this writing, courts have not determined that any Canadian company or government official has attempted to evade tariffs or help China avoid tariffs through this supposed scheme, and there is not enough publicly available evidence that such a scheme has happened or is happening.

Bombardier on the line

The personal tone of the dispute sharpened when Trump threatened Canadian aircraft company Bombardier that it can no longer sell in the U.S. unless it moves its manufacturing there. “NO MORE SELLING BOMBARDIER IN THE UNITED STATES!” Trump wrote in a Truth Social post on Monday. “If they want our Market, they must build here, and stop treating America like a ‘piggybank’.”

The move came amid an escalating trade war and hours before Canadian retaliatory tariffs were set to be imposed on $20bn worth of U.S. goods. Bombardier underscored that it employed thousands of American workers and said it valued its partnerships with American companies. It is unclear how Trump intends to block Bombardier from doing business in the U.S.

The Montreal-based company already operates a factory in the U.S. state of Kansas that builds special mission military planes and employs 3,500 American workers. It also operates sites in Texas, Arizona, Florida, Connecticut, Illinois, Delaware, California, DC and New Jersey. About half of its fleet — 5,100 aircraft — is operated by Bombardier customers based in the U.S.

Bombardier’s jets are built at facilities in Canada, the U.S. and Mexico and comply with the North American free trade agreement. The company is one of Canada’s largest, having contributed C$7.4bn to the country’s GDP in 2024, according to a report commissioned by Bombardier. It is also one of the largest employers in Quebec’s manufacturing sector.

In a post on X, Quebec premier Christine Fréchette called the company “a source of pride” for her province and “a flagship of our economy.” She added that she has reached out to Bombardier CEO Éric Martel and offered her government’s full support. On Trump’s threat, Fréchette wrote: “I will not respond to provocation with provocation.” “Quebec will not allow anyone to dictate where our companies must produce in order to access a market.”

What comes next

Canada and the U.S. have said they would like to strike a deal, but no movement has been made to resume talks after they collapsed in late August. Both sides are framing the fight in stark terms. Carney calls his country at war; Trump calls Canada’s exchange rate “unacceptable” and has posted a map of North America overlaid with the U.S. flag.

Businesses are preparing for the dispute to last. The lobster industry in both countries are heavily dependent on the other, with American-caught lobster often sent north to be processed before it is shipped back to the U.S. and sold. The decision to remove seafood from the retaliatory list was an acknowledgment of that interdependence.

The question now is whether the dollar-for-dollar response hardens into a cycle where each new duty begets another, or whether the shared economic weight of a nearly $900bn trading relationship forces a pause. Carney says Canada is ready to sit down when the Americans are ready. Greer says the ball is in Canada’s court. In between, factories, suppliers and households are watching prices move on everyday goods, and a long-running alliance is being tested by tariffs, threats and the rumor mill about steel.