US to impose 50% tariffs on Canadian imports worth $20 billion; Carney vows to match tariffs 'dollar for dollar'

The United States is set to impose 50 per cent tariffs on $20 billion worth of Canadian imports after the two long-standing allies failed to reach a deal at the last minute.

The new tariffs will come into effect at 12:01 am on Saturday (local time) on hundreds of items that Washington imports from Ottawa, including plywood, liquor, electrical equipment and hockey gear, Bloomberg reported.

Here's what we know

The two sides were locked in negotiations for weeks and had worked on a draft deal that included reducing tariffs on certain Canadian steel and aluminium to 25 per cent and cutting duties on Canadian autos to 15 per cent.

In exchange, Ottawa was to remove retaliatory measures that it implemented last year after the US President launched the trade war. According to reports, the White House had been seeking a series of concessions, including eliminating Canada's counter-tariffs on American vehicles and lifting the ban on the retail sale of US alcoholic beverages in most provinces.

According to Reuters, while the new tariffs affect a relatively smaller share of Canadian exports, they add to the previously imposed US tariffs on steel, lumber and autos. Further, the new tariffs could thwart Ottawa's economic recovery and affect how the long-standing allies engage in the coming months on broader negotiations for a free-trade deal.

The tariffs will apply even to Canadian goods that qualify for preferential treatment under the US-Mexico-Canada trade agreement, which has protected much of Canada's industry from previous US tariffs.

However, the two sides failed to finalise the deal after three days of talks in Washington between Canada's Minister for Trade with the US, Dominic LeBlanc, and US Trade Representative Jamieson Greer. Greer said the Canadian side had declined to finalise an agreement, while a US official noted that no new talks had been scheduled.

In a statement read to reporters, Greer said, "Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days."

Canadian PM vows retaliation

Canadian Prime Minister Mark Carney on Friday (local time) said that he had suspended trade negotiations and added that Ottawa would retaliate dollar for dollar against the new tariffs. According to AP, Carney blamed Washington for the breakdown, calling the proposed terms "unfair."

In a statement, he said, "I have decided to suspend trade negotiations with the U.S. and have directed Canada’s negotiators to return to Ottawa." He further said, "They (negotiators) have worked hard, in good faith, to defend the interests of Canadians throughout these negotiations up until the very last minute. However, last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal."

US-Canada ties

The failure to reach a deal has once again heightened tensions between the two longtime allies, which recorded nearly $900 billion in trade in goods and services last year. Beyond the tariff dispute, President Donald Trump has repeatedly floated the idea of making Canada a US state, called its prime ministers “governors,” and said the country could not survive without the United States.