Canada’s counter-tariffs on American products went into force just past midnight Tuesday, as Prime Minister Mark Carney stepped up economic pressure on his nation’s foremost trading partner following the breakdown of talks last month, deepening a trade conflict that has now lasted 18 months. The duties apply to $20 billion worth of U.S. goods, with rates between 15% and 50% covering items such as steel, furniture, apparel, and electronics.

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This matching retaliation signals a sharper phase in the standoff between the two neighbors, with officials on both sides pointing fingers over the failure of a deal that appeared near completion a fortnight ago. The heightened friction casts doubt on the future of the U.S.-Mexico-Canada trade pact, which faces annual reviews after President Donald Trump opted against a ten-year extension.

Michael Harvey, who leads the Canadian Agri-Food Trade Alliance and sits on Carney’s advisory panel for bilateral economic ties, voiced worries about a cycle of escalation, while also recognizing the prime minister’s need to identify points of leverage.

Tariffs imposed by Washington last month targeted wine, furniture, dairy, cement, clothing, fishing rods, and hockey gear, affecting $20 billion—or 5%—of Canadian exports to the U.S. Government figures from both countries indicate that Canada has sent nearly 68% of its total exports to the U.S. this year, with about 80% of that moving tariff-free under USMCA exemptions, which have offered some buffer to the domestic economy.

The latest duties, rooted in a U.S. law from the Depression era, prevent Ottawa from invoking USMCA protections. Doubts over the pact’s longevity have added to uncertainty around investment and growth, as Canada contends with an economy 13 times its size in this trade fight.

Surveys suggest Carney enjoys widespread backing among Canadians, though analysts caution that support could erode within months as the economic fallout becomes clearer. A Reuters/Ipsos poll showed only 20% of Americans backed Trump’s tariffs on Canadian goods.

Carney stated last week that his administration was prepared to finalize a mutually beneficial trade agreement. Trump, meanwhile, threatened in the previous month to lift tariffs on all Canadian cars, trucks, and auto parts to 50% effective January 1, and issued an executive order renaming Lake Ontario as Lake America.

Source: IndexBox Market Intelligence Platform