Talks between the US and Canada broke down late last Friday night, and 50% tariffs are now hitting roughly $20B worth of Canadian goods, from motorcycles and rum to hockey sticks and even gravy boats. Canada is set to retaliate on September 8 with a similar round of tariffs on US goods. If we had to place a bet, we would still wager these tariffs do not survive the courts and ultimately get refunded, with interest, to US importers. The reason is fairly straightforward: Section 338 has never been used before, and it is widely viewed as having been rendered moot by later changes to US tariff law dating back to Smoot-Hawley.

But the more important point here is not just the legality of these tariffs, it is the pattern they reveal. Nineteen months into Trump’s presidency, more and more countries appear to be questioning whether the United States can be taken at its word in a negotiation. Carney has said as much openly. Iran’s Revolutionary Guard reportedly halted talks on the view that Washington would breach any understanding, potentially as early as November 4. Japan and South Korea, meanwhile, have watched US tariff rates move up, down, and back up again in less than two years. When counterparties see that kind of volatility, it is safe to say they are less interested in making deals and more interested in waiting Trump out.

That brings us to Monday, when Secretary Bessent is expected to outline penalties for countries giving Iran any kind of economic lifeline. In a sense, that announcement will tell us a lot. If the administration is serious, it has to hit China hard, but doing so risks upsetting the tacit 20% tariff cap that has helped keep rare earths flowing and could jeopardize Trump’s widely anticipated September 24 visit with Xi. If it does not hit China hard, then the White House looks weak on Iran. Either way, the economic consequences are massive. What started as a Canada tariff story is increasingly looking like a much bigger story about credibility, leverage, and whether the US can still strike durable deals in a world that is learning not to trust short-term reversals.