What looked like a done trade deal days ago has unravelled. Trade talks between Canada and the US collapsed late Friday night, and new 50% U.S. tariffs on roughly US$20 billion (C$28 billion) of Canadian goods took effect at midnight on Saturday, August 22. Canadian Prime Minister Mark Carney called the outcome “a miscalculation,” while US Trade Representative Jamieson Greer blamed Canada for introducing last-minute demands.

• From finalizing a deal to no deal. US President Donald Trump had paused the tariffs earlier in the week, telling reporters the two countries “have a deal.” But Carney recalled Canada’s negotiating team to Ottawa on Friday, saying he didn’t want to have a bad deal rather than accept the final terms of the US offer.
• Carney pointed to disagreement over extending auto tariff relief to trucks, not just cars. Meanwhile, US efforts to limit Canada’s ability to sign trade deals with other countries, such as China, and pressure over Canadian culture and French-language protections, were other issues Canada could not agree to.
• Carney says Canada will match the US tariffs dollar for dollar, with duties on American steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics set to begin on September 8. Energy, potash and critical minerals were excluded from the new US tariffs.
• No new talks are scheduled, and Trump appears unsure about resuming negotiations. Markets will be watching for any sign of a thaw before Canada’s retaliatory tariffs take effect.

This is a reminder that trade headlines can turn quickly, and the path back to a trade deal isn’t clear. There is a possibility of continued volatility in trade-exposed sectors such as autos, steel and agriculture, along with pressure on the Canadian dollar. The Bank of Canada will need to weigh the economic growth and inflation implications of a longer standoff.

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