US, Canada Trade War Escalates, But Deal Still Possible

The United States and Canada have escalated their trade war with a new round of tit-for-tat tariffs, even as analysts say the longtime allies are likely to eventually strike a deal to end a conflict neither side truly wants.

The prospects for compromise looked bleak Tuesday after Canadian Prime Minister Mark Carney responded to new 50% U.S. tariffs on certain Canadian goods by imposing retaliatory tariffs on about $20 billion worth of American imports, including steel, dairy products, appliances and farm equipment.

"You're at war when you get attacked. We got attacked," Carney said over the weekend.

Ontario Premier Doug Ford told The Associated Press he was ready to escalate further by cutting off electricity and critical mineral shipments to the United States. President Donald Trump responded by threatening additional tariffs on Canada's auto industry if the country doesn't "fall in line."

Despite the heated exchanges, experts say there is still time to pull back. "If there is political will, there is an off ramp," said former U.S. trade negotiator Wendy Cutler. Christopher Sands, who heads the Center for U.S.-Canada Studies at Johns Hopkins University, said the two countries have gone through tense negotiations before. "It's almost like it's not real until somebody walks away from the table," he said. "I'm not panicked."

The U.S. tariffs Trump imposed Saturday cover only about 5% of Canada's exports to the United States, according to the report, and Oxford Economics projects the trade conflict would trim Canadian economic growth only slightly next year. U.S. Trade Representative Jamieson Greer downplayed the rift as a "tempest in a teapot."

Carney's retaliatory tariffs don't take effect until September 8, and Trump's proposed auto tariffs wouldn't begin until January 1, after the November 3 midterm elections. That timeline leaves room for renewed negotiations, Sands said.

Cutler suggested the U.S. could use a trusted emissary to restart talks, noting that Trump's son-in-law Jared Kushner helped negotiate the original USMCA. But Canadians are in no mood for a Trump-friendly deal after his talk of making Canada the 51st state and his suggestion Tuesday that he might rename Lake Ontario "Lake America."

"Fighting with Washington is hugely popular in Canada right now," said Scott Lincicome of the Cato Institute. Talks collapsed Friday after negotiators appeared close to a deal, with Trump briefly announcing an agreement before it fell apart.