Remember? A few months ago, there wasn’t a single news headline without that word. And then… silence. As if they had disappeared from the face of the earth. Except they didn’t go anywhere. And within four days, the US and Canada went from “we have a deal” to an all-out trade war. 50% tariffs, retaliation, and Trump wanting to rename Lake Ontario “Lake America.”
Yes, you read that correctly.
Let’s break it all down.
Last week, Canadian Trade Minister Dominic LeBlanc went to Washington and spent three days at the negotiating table with US Trade Representative Jamieson Greer. At one point, everyone was saying they had found a path toward an agreement.
The Canadian negotiators left Washington empty-handed. Prime Minister Mark Carney announced that he was suspending the negotiations and calling his team back to Ottawa. Then, at 12:01 a.m. Saturday, US tariffs of 50% on approximately $20 billion worth of Canadian products went into effect.
What exactly was targeted? Wine, cement, furniture, clothing, dairy products, fishing rods. Even wooden hockey sticks. Which, as was reported, almost nobody uses anymore.
“You might say, ‘But that’s peanuts, Christo.’” And you’d be right. We’re talking about just over 5% of Canadian exports to the US. Economically, it doesn’t change the game. Symbolically, however, it changes everything. Because it shows that the two biggest allies in North America are no longer talking.
And this is where things get interesting. Because both sides are saying exactly the same thing. That the other side is to blame.
Carney says the Americans made “last-minute changes” that were “unfair, uneconomic, and called into question the credibility of any agreement.”
Greer says the Canadians were at fault. “In the final hours, the Canadians wanted more.” He added that the US had offered to cut steel and aluminum tariffs in half, significantly reduce tariffs on automobiles, and even make changes to softwood lumber tariffs. “They just wanted more,” he said. “It doesn’t make economic sense. Maybe for political reasons.”
And perhaps that really is the key. Because Carney is not just some random politician. He is the only person in the world to have run two central banks of major economies. He was elected last year on a promise to stand up to Trump. And polls show that most Canadians do not want any concessions.
So what does that mean? That saying “yes” would have cost him more politically than saying “no.”
And as if that weren’t enough, Trump raised the stakes on Monday.
He announced on Truth Social that starting January 1, 2027, tariffs on all cars, trucks, auto parts and steel from Canada would rise to 50%. Today, they are 25%. In other words, a doubling.
“Canada has been ripping off the USA for years. No more!” he wrote. He then went after Ontario Premier Doug Ford, who had threatened to cut electricity supplies and critical minerals to the US. Trump called him a “clown” and a “Carney puppet.” Ford responded by calling Trump a “bully” and a “dictator.”
And then came the cherry on top:
“WE DON’T NEED CANADA, THEY NEED US! They do 95% of their business with us.”
Of course, there is a big “but.” Trump constantly complains about the US trade deficit with Canada. The problem is that this deficit is largely caused by the fact that the US buys enormous quantities of Canadian oil. In other words, the “deficit” is essentially energy that the US itself needs.
And there’s another thing that isn’t mentioned very often. Auto parts cross the border multiple times before ending up in a finished vehicle. So they can potentially be taxed again and again.
And pay attention to the irony: Toyota and Honda account for 76.5% of Canadian vehicle production. Each of them individually produces more cars in Canada than Ford, GM and Stellantis combined.
And now we come to the final piece. Yesterday, Tuesday, Canada responded.
“Dollar for dollar,” just as Carney had promised. Tariffs on more than 700 American products worth approximately $20 billion. Exactly the same value as the US tariffs. The rates range from 15% to 50%, targeting dairy products, seafood, household appliances, clothing, paper and lumber. And the biggest hit: 50% tariffs on American steel and aluminum.
They take effect on September 8. At the same time, Ottawa announced a $7.5 billion package to support businesses and workers that will bear the brunt of the impact.
“When the US asked for too much and offered too little, we made a choice. We chose Canada,” Finance Minister François-Philippe Champagne said.
And LeBlanc put it even more bluntly: “Our preference was an agreement that benefits both countries. But in the meantime, we’re not sitting by the phone waiting.”
That said, we should mention this too. Carney himself publicly acknowledged that the retaliation “will increase costs and reduce choices for Canadians.” In other words, he knows his own people will pay a price as well.
The Canadian dollar fell on Monday, and the Canadian Federation of Independent Business warned that the impact on small businesses would be “immediate and significant.”
