Canada, US and tit-for-tat tariffs: How will they impact their economies?

Canadian Prime Minister Mark Carney has announced retaliatory tariffs that will “match Washington’s new tariffs dollar for dollar” after days of intense negotiations between the United States and Canada broke down. The tit-for-tat response came after US President Donald Trump imposed a 50 percent levy on $20bn of Canadian goods, or 5.5 percent of its exports, disrupting the long history of stable relations between the two North American neighbours. Trump first imposed tariffs on key imports from Canada early in his second term last year.

The two countries have scuffled since with Trump periodically making new tariff threats. So what prompted this latest escalation, and how will it impact the two Western economies? In Ottawa on Saturday, Carney said the talks with the US broke down late the day before after Trump set conditions that were ultimately unacceptable.

They had language that wanted to restrict that. Unacceptable.” He added that US negotiators also made unacceptable “threats” to the French language and “Quebec culture”, referring to the French-speaking province in eastern Canada. In a speech later in the day, Carney suggested that last-minute changes at the bargaining table had prompted him to recall his negotiators from Washington, DC, to Ottawa.

The US president claimed Canada has also charged US farmers “massive amounts” of tariffs for years, adding, “No more!!!” The list of goods from Canada that will be affected is long, ranging from whisky to goose-down jackets and ice hockey equipment. The 50 percent levy on roughly $20bn of Canadian goods covers more than 500 product categories, including: The tariffs also apply to some products that were previously protected under the US-Mexico-Canada Agreement, a trade pact signed during Trump’s first term, putting its future into question. The new tariffs are being imposed in addition to pre-existing US tariffs on steel, lumber and cars.

Ottawa, meanwhile, said its retaliatory measures beginning on September 8 will target steel, dairy, appliances, farm equipment, pulp and paper, and electronics. The Canadian government will release more details on the items to be targeted in the coming days, Carney said. Canada’s economy is expected to face a big blow from the tariffs, some experts said.

Prices are going to go up. Unemployment is going to go up as well,” Al Jazeera’s David Mercer said, reporting from Calgary, the largest city in the western province of Alberta. Julian Karaguesian, a lecturer and trade expert at McGill University in Montreal, told Al Jazeera the tariffs would “effectively price hundreds of Canadian goods out of the US market”.