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Carney’s retaliation and the new tariff timetable
Prime Minister Mark Carney confirmed on Saturday that Ottawa will impose tariffs on American goods “dollar‑for‑dollar” from 8 September, matching the 50 % levies that took effect at 12:01 a.m. on Saturday against Canadian exports worth roughly US$20 billion. In a press conference, Carney described the Canada‑U.S. relationship as facing an “existential threat”, arguing that Washington’s demands had exposed “the limits of their commitment to a true economic partnership”. When asked about his war‑like language, he replied, “You are at war when you get attacked. We got attacked.” The new duties are intended to mirror the impact of the American tariffs, which were imposed after negotiations collapsed at the final hour. Both governments blamed each other for the breakdown, with the U.S. accusing Canada of intransigence and Ottawa citing “unreasonable” demands as the cause.
Manufacturing and forestry sectors brace for impact
The latest round of American tariffs focuses heavily on Canada’s manufacturing base, prompting concerns that the sector will bear the brunt of the escalation. Dennis Darby, chief executive of the Canadian Manufacturers and Exporters, a member of Carney’s advisory committee on Canada‑U.S. economic relations, said the prime minister’s remarks indicated a “long‑haul” approach. “Our preference is for them to quickly get back to the table, but I don’t think that is going to happen any time soon,” Darby observed. He warned that continued back‑and‑forth would erode corporate confidence and stall investment decisions.
The forestry industry is also feeling the pinch. Derek Nighbor, CEO of the Forest Products Association of Canada, described the sector as “very much collateral damage”. Softwood lumber already faces a 10 % levy under U.S. Section 232 tariffs, plus cumulative anti‑dumping and countervailing duties of 35 %. The new 50 % tariffs will now apply to billions of dollars of wood and paper products. “We’re very disappointed. This is going to be very difficult for our sector,” Nighbor said, adding that his group will work with the government for support measures. Carney has signalled that Ottawa will provide assistance, though Darby cautioned that financial aid “will help keep people on the payroll, but it is not a long‑term solution for sure”.
Steel sector and the USMCA’s waning relevance
The collapsed trade deal would have imposed a four‑million‑tonne quota on Canadian steel exports to the United States, with a 25 % tariff inside the quota and 50 % above it. Canada would also have been required to remove all counter‑tariffs on U.S. steel. Marty Warren, national director of the United Steelworkers in Canada, called this an “economic war” and urged his generation to protect sovereignty and the Canadian economy. “This isn’t a war as in guns and boots on the ground, but this is an economic war,” he said, stressing the need to safeguard future generations.
The new tariffs also encroach on goods covered by the United States‑Mexico‑Canada Agreement (USMCA). BMO Capital Markets senior economist Robert Kavcic noted that “90 %‑plus of Canadian exports not targeted by specific levies have continued to move tariff‑free under cover of the existing trade agreement”. The fresh duties, he warned, raise fresh doubts about the pact’s usefulness and could jeopardise the decade‑high surge in Canadian business investment that had been gathering momentum. “Although businesses had been showing signs of looking past tariff headlines, this would be the toughest action since the spring of 2025,” Kavcic commented, highlighting the risk that uncertainty could reverse recent growth.
Business confidence crumbles under unpredictable policy
The immediate fallout for small enterprises is already evident. Dan Kelly, president of the Canadian Federation of Independent Business, said the impact “will be immediate and significant”. A July survey of 1,833 CFIB members found that roughly 40 % anticipated being affected, with one third expecting to lose at least half of their revenue because of the new duties. Kelly’s warning underscores a broader sentiment: even firms not directly targeted feel exposed. RBC Economics pointed out that “the unpredictability of U.S. administration tariff policy means it is not possible for businesses to predict which sectors might be next”, adding that this uncertainty is “a weight on business confidence across all trade‑exposed industries, not just those directly targeted”.
Former Royal Bank of Canada CEO Gord Nixon, who now sits on the boards of George Weston Ltd. and BlackRock Inc., described the current climate as a reinforcement of the damage Mr. Trump had inflicted on Canada‑U.S. relations since launching his global trade war last spring. “The worst‑case scenario is more and more escalation and that’s what hopefully they’re trying to avoid, but whether it’s avoidable or not is a $64,000 question to which I don’t think anyone has the answer because you’re dealing with a very unpredictable side,” Nixon said. He praised Canada’s predictability and negotiating team but cautioned, “You can’t negotiate with yourself.”
Why it Matters
The tariff escalation marks a pivotal moment for Canada’s economic outlook, threatening to undo a decade‑long recovery in business investment and exposing deep vulnerabilities in key export sectors such as manufacturing, forestry and steel. The dispute also challenges the foundational role of the USMCA, raising questions about the durability of North American trade integration at a time when global markets are already volatile. For small and medium‑sized enterprises, the immediate financial strain could force retrenchments, job losses and a retreat from expansion plans, reverberating through local economies across the country. Moreover, the ongoing unpredictability of U.S. trade policy is eroding the confidence essential for long‑term planning, potentially reshaping Canada’s approach to foreign markets and prompting a reassessment of its reliance on a single neighbour for the majority of its trade. The stakes extend beyond balance sheets: the dispute tests Canada’s ability to safeguard its economic sovereignty while navigating a rapidly shifting global trade landscape.