US-Canada tariff talks collapse, raising trade war fears

US President Donald Trump... (Photo by Brendan SMIALOWSKI / AFP)

Trade negotiations between the United States and Canada have collapsed, raising the prospect of a fresh escalation in the trade war between the two North American neighbours after Ottawa rejected what Washington described as the final terms of a deal to avert sweeping new tariffs.

The breakdown came late Friday after days of negotiations that US officials had said were moving towards an agreement, with Canada now threatening to respond to any new American tariffs with retaliatory measures.

The development, first reported by The New York Times, came as the Trump administration prepared to impose new levies on Canadian imports from early Saturday.

The US Trade Representative, Jamieson Greer, accused Canada of abandoning the negotiating process after the two sides had made substantial progress towards an agreement that would have given Canadian exports preferential access to the American market.

Greer said Ottawa introduced new demands and reversed some commitments reached during the negotiations, upsetting what he described as a carefully negotiated balance.

Canada’s Prime Minister, Mark Carney, rejected that account, saying the last-minute conditions came from Washington and were unacceptable to his government.

Carney said the American demands were “unfair, uneconomic, and called into question the reliability of any deal.”

He acknowledged that the negotiations had produced significant progress but said the outcome still fell short of what Canada considered necessary to protect its interests.

The immediate dispute centres on the scale and scope of the proposed American tariffs, with US officials indicating that Canadian exports in sectors including automobiles, steel, aluminium and lumber remained major points of disagreement.

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Washington had offered Canada what Greer described as the most favourable treatment available to any major exporter to the United States, but the two sides failed to settle the remaining differences.

The collapse threatens to deepen an already damaging economic confrontation between the countries, whose economies are closely intertwined and whose supply chains, particularly in manufacturing and the automotive industry, cross their shared border.

Canadian retaliation would introduce another layer to the dispute, potentially prompting further action from President Donald Trump.

A US official said Washington was prepared to respond if Canada imposed counter-tariffs, leaving open the possibility of another round of escalating measures.

The prospect of renewed tariffs had already begun to affect preparations at the US border. Shortly before Greer announced the collapse, US Customs and Border Protection issued guidance to importers on tariffs covering Canadian products identified by the administration.

The timing leaves both governments facing an immediate economic and diplomatic test, with the failure of the talks removing what had appeared to be a near-term route towards de-escalation.

For Carney, the next step is expected to involve measures to protect Canadian industries from the new American levies while managing the consequences for consumers and businesses on both sides of the border.

For Trump, the collapse provides another opportunity to press his administration’s broader demand that trading partners make greater concessions to the United States—while risking deeper disruption with one of America’s largest trading partners.