US imposes 50% tariffs on $20 billion worth of Canadian products, and
Canada says it will retaliate
[August 22, 2026] By
PAUL WISEMAN and ROB GILLIES
WASHINGTON (AP) — The United States imposed 50% tariffs on $20 billion
worth of Canadian products early Saturday, and Canada immediately said
it would retaliate, after last-ditch negotiations failed to resolve the
latest strain in already tense relations between the historic allies.
President Donald Trump’s import taxes will hit about 5% of what Canada
ships to the United States every year, including products ranging from
hockey sticks to tongue depressors.
“Canada will match those tariffs dollar for dollar to protect our
workers and businesses,” Canadian Prime Minister Mark Carney said in a
statement. The retaliation escalates the trade conflict and calls into
question the future of a North American trade pact between the United
States, Canada and Mexico that is crucial to industry in all three
countries.
Canada sought concessions on Trump tariffs on steel, aluminum, autos and
lumber that the United States was unwilling to provide, a senior Trump
administration official told reporters.
“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,” U.S. Trade Representative Jamieson
Greer said in a statement read to reporters on a press call shortly
before midnight.
Carney blamed Washington for the breakdown, saying “last-minute changes
in the U.S. proposed terms were unfair, uneconomic, and called into
question the reliability of any deal.” He said he had suspended
negotiations and directed Canada’s negotiating team to return to Ottawa.
Carney said his government would announce additional support for
Canadian workers and businesses in the coming days.
Greer said the U.S. offer was “forward-looking” and included “a historic
economic and national security partnership.”
No further talks have been planned. The breakdown in negotiations marked
a sharp reversal from two days earlier, when officials from the two
countries sounded as if they were headed toward a compromise.
Carney said Canada’s goal throughout the negotiations had been to secure
the best possible agreement, “never a deal at any price or on any
deadline.”
A typically cooperative alliance goes sour
The political impact will likely be even bigger than the economic
fallout. The countries sold each other $880 billion worth of goods and
services last year.
The tariffs were initially supposed to kick in at 12:01 a.m. Wednesday.
But Trump extended the deadline for three days to allow talks to
continue, but the two countries still could not reach an agreement in
time.
The two countries have wrangled for decades over trade, poking each
other over sore spots like Canadian softwood lumber imports and U.S.
access to Canada’s protected dairy market.
Somehow, they still managed to remain friends, allies and trading
partners. Canadian soldiers fought alongside Americans in Afghanistan
after 9/11. The 5,525-mile U.S.-Canada border is undefended, and nearly
330,000 people and $2 billion worth of goods cross it every day; 800,000
Canadians live in the United States.
Trump’s approach to dealing with Canada marks an extraordinary departure
from the traditionally cooperative relationship between the two
countries. Trump has hit Canadian goods with tariffs — in a push to
bring manufacturing back to the United States — and has repeatedly made
inflammatory comments about turning Canada into America’s 51st state.
Carney said Canada had recognized that “America has changed” and that
the two countries would “not return to our old relationship.”
Canadians and Americans are frustrated
The Canadian public is fed up. A petition to expel the U.S. ambassador,
a Trump ally, has collected nearly 248,000 signatures since July 21. It
accuses Ambassador Pete Hoekstra of having “normalized’’ Trump’s talk of
annexing Canada, among other things.
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President Donald Trump walks on the Ellipse as he arrives on Marine
One near the White House, Friday, Aug. 21, 2026, in Washington. (AP
Photo/Manuel Balce Ceneta)
 The two countries had good reasons
to find a compromise.
Nearly 72% of Canada’s goods exports last year went
to the United States. And the Trump administration might be wary of
imposing a hefty new tariff — paid by U.S. importers who try to pass
along the cost to consumers via higher prices — ahead of November’s
midterm elections. American voters are already frustrated with the
high cost of living.
“Canada likely wanted further sector-specific relief than the U.S.
was willing to offer, or Canada’s concessions did not go far
enough,'' said Ryan Majerus, a partner at King & Spalding and a
former U.S. trade official. "Either way, I think both sides will be
under immense pressure in the coming days to still find an off-ramp.
But if Canada has agreed to also impose tariffs, the off-ramp may be
even harder to find.”
Candace Laing, president and CEO of the Canadian Chamber of
Commerce, called the tariffs “a body blow to North American
competitiveness,” warning they would raise costs for Americans while
threatening Canadian customers, investment and small businesses.
Trump has turned to Depression-era tariffs
Trump has made tariffs the centerpiece of his second-term economic
agenda. Last year, he imposed double-digit import taxes on almost
every country, justifying them by declaring the longstanding U.S.
trade deficit a national emergency. The Supreme Court in February
ruled that he’d overstepped his authority, striking down those
tariffs and setting the stage for the federal government to pay
refunds to importers.
So Trump has looked for other legal authority to justify tariffs.
To hit Canada, he reached back to the Great Depression, invoking
Section 338 of the Tariff Act of 1930 to threaten 50% tariffs on
products that account for about 5% of Canadian exports to the United
States.
Nearly a century ago, with the U.S. and world economies in collapse,
Congress passed the 1930 tariff law, imposing taxes on imports from
around the world. Known as the Smoot-Hawley tariffs after their
congressional sponsors, they are notorious among economists and
historians for limiting world commerce and making the Great
Depression worse.
Section 338, which has never been used before to impose tariffs,
authorizes the president to slap import taxes of up to 50% on
imports from countries that have discriminated against U.S.
businesses. No investigation is required to justify the levies. Nor
is there any limit on how long they can stay in place.
The rift comes as the United States, Mexico and Canada are trying to
renew a trade agreement that Trump negotiated in his first term and
once praised as a triumph. The United States has begun formal talks
with Mexico over revamping the US-Mexico-Canada Agreement (USMCA).
But talks with Canada have not begun, and escalating trade conflict
casts doubt on whether they will.
“Canada told the Americans in advance that if these tariffs landed,
it would stop negotiating and retaliate,'' said Barry Appleton,
senior fellow at the Center for International Law at New York Law
School. ”The American trade representative said publicly he would
not tolerate retaliation. Both sides have now committed themselves
in public, which is how escalation stops being a choice.''
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Associated Press writer Michelle L. Price contributed.
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