Canada Counter-Tariffs Hit C$27.6B of US Goods as Trade War Deepens

A matched response, and a war that keeps escalating

In late August, Ottawa promised to answer Washington's steep new tariffs. Seven weeks later, that answer is the law, and both sides have moved past it. Canada's counter-tariffs on C$27.6 billion of American imports took effect at 12:01 a.m. on September 8, 2026. Ottawa calls them a dollar-for-dollar match for the 50 per cent duties the United States imposed on Canadian goods on August 22 under Section 338 of the Tariff Act of 1930.2 Washington has escalated since then, and Ottawa has said publicly that it will not sign a bad deal just to make the pain stop.4

The main point is that Prime Minister Mark Carney picked calibrated proportionality over either giving in or going much bigger. The structure of the response shows it. It answers the Section 338 duties without reaching for Canada's heaviest weapons, and it comes with a large domestic relief package. That approach has bought Ottawa political unity at home. So far it has not bought any change in American behaviour.

How the talks collapsed

The breakdown was sudden. Days before the deadline, President Donald Trump paused the duties for three days and declared on social media that the two countries had a "DEAL!"11 Late on Friday, August 21, Carney suspended negotiations and called his negotiators home. He blamed last-minute U.S. changes that he called unfair, uneconomic and damaging to the reliability of any agreement.11 At a press conference the next morning he summed it up by saying Washington had asked for too much and offered too little.1

The two governments tell different stories about who walked away. U.S. Trade Representative Jamieson Greer said Canada refused to finalize terms agreed earlier that week. He cited new Canadian demands and backtracking, and said Canada had been offered the best treatment of any major exporter to the U.S. market.15 Greer also said Washington was offering large tariff cuts on steel, aluminum, autos and lumber, along with a security partnership and formal talks on the continental trade pact.16 Bloomberg had reported that U.S. negotiators agreed to lower duties on cars and metals from 25 to 15 per cent.18

Carney's list of grievances was specific. He said the U.S. wanted to limit relief to autos only and leave out medium and heavy-duty trucks.18 He also said American negotiators tried at the last moment to restrict Canada's ability to sign trade deals with other countries, which he called unacceptable.12 He mentioned terms involving Ford trucks and limits on Canada's protection of language and culture, which he framed as a matter of sovereignty.16 Trump responded that he would "never interfere with Canadians speaking French."13

The two accounts can't both be fully true. Still, the fact that Carney gave concrete clauses while Washington described the problem in general terms makes his version easier to check. The clause on deals with third countries matters most. Carney has made diversifying away from the U.S. central to his strategy, so a limit on new trade partners would have cut against his whole economic plan, not just one sector.

What Canada's counter-tariffs actually cover

The tariffs are tiered, not flat. They cover more than 700 product classifications at rates of 15, 25 or 50 per cent depending on the category.3 Steel and aluminum duties already in place rose from 25 to 50 per cent to match U.S. rates.2 Appliances, cheese and other dairy products, and some steel and aluminum derivatives face 25 per cent. A smaller group, including electrical equipment and tools, faces 15 per cent.13 Earlier counter-tariffs, including the ones on U.S. autos, are still in force.2

The headline numbers vary across coverage, and the reason is worth explaining. Canadian and some U.S. outlets put the American duties at about $28 billion of goods.111 Other reports say roughly $20 billion.1812 The gap comes mostly from currency: Canada's own measure lists C$27.6 billion, which is about US$19.9 billion.7 One report put the Canadian retaliation at about $20 billion while also calling it dollar-for-dollar, which only works if that figure is in U.S. dollars.6

Measured against total trade, both sides have kept this round fairly contained. The U.S. duties cover about 5.5 per cent of Canada's exports to the United States, and Canada's countermeasures cover about 7.3 per cent of its imports from there.13 Oxford Economics estimates the new duties raise the effective U.S. tariff rate on Canadian goods from 5.1 to 6.9 per cent. It expects manufacturers in Quebec, New Brunswick and Ontario to be hit hardest.13 Both sides together trade about $715.5 billion in goods a year.4

The Section 338 tariffs are new legal territory. The provision has never been used before, and it allows duties of up to 50 per cent on partners found to discriminate against U.S. commerce.18 Washington cited Canadian treatment of American autos, alcohol and dairy. The duties apply even to goods that comply with the continental trade agreement, but they exclude energy, potash, fish, critical minerals and goods already covered by Section 232 tariffs.7 Greer has described the 50 per cent rate as payback for Canada's earlier retaliation.18 On that reading, every Canadian counter-move invites the next American one.

Washington's second move

That is roughly what followed. On the day Canada's duties took effect, the U.S. changed its list of targeted Canadian goods. It dropped some products and added many others, and the new items became subject to tariffs on September 15.9 The U.S. also banned imports of certain Canadian alcohol, dairy products and motorcycles starting September 29.9 One think-tank estimate puts the ban's coverage at $967 million of imports based on 2025 figures, about 87 per cent of it alcohol. Washington targeted alcohol because several provinces had pulled American liquor from their shelves.10

Trump has also threatened 50 per cent tariffs on Canadian cars, trucks, auto parts and steel starting on New Year's Day.14 Carney said he might need more targeted retaliation and that "everything's on the table."14 Despite that, Ottawa has not announced any new retaliation since September 8.4 Trade Minister Dominic LeBlanc has called the U.S. measures illegal and unjustified and says the two sides are discussing alternatives. He also said Canada is "not waiting by the phone."4

The two governments are on different tracks. Washington keeps adding pressure, while Ottawa matched the August tariffs and then stopped. The holding pattern looks deliberate. Canada's leverage is limited, and the real test will come if the January auto and steel threat is carried out.

Cushioning the blow at home

Ottawa paired the tariffs with C$7.5 billion in support. Of that, C$3.5 billion goes to a rapid-response program for workers that broadens Employment Insurance changes for people who lose jobs because of tariffs.3 A new C$2 billion Canada Strong Diversification Fund is meant to back shovel-ready projects, capital maintenance and efforts to find new markets.9 The Large Enterprise Tariff Loan facility now offers liquidity support for 36 months instead of 24, and repayment periods can run up to 15 years instead of 10.3 Existing remissions for steel and aluminum carry over automatically, and some broader remission relief is available until June 30, 2027.3

Carney admitted the costs openly. He said the countermeasures would raise prices and reduce choice for Canadians, and that some U.S. states and companies were caught in the middle as bystanders.15 Oxford Economics expects businesses to absorb at least half the cost of the counter-tariffs and households about a fifth through higher prices.6 Bank of Canada Governor Tiff Macklem has warned that the tariffs make growth prospects more uncertain and increase the risk of higher inflation.45

Job losses are already showing up in politics. Industry Minister Mélanie Joly has warned Cleveland-Cliffs that its Stelco unit cannot blame the trade war for cutting up to 500 jobs in Hamilton. She pointed out that the U.S. parent company's chief executive has publicly backed American steel tariffs, and Ottawa has threatened enforcement action over the jobs Stelco committed to keep when it bought the plant.8

The leverage problem

Public opinion is behind Ottawa for now. A Leger poll found that 56 per cent of Canadians favour a tougher line with no more concessions.17 Ontario Premier Doug Ford backed the tariff-for-tariff approach and also urged Ottawa to aim retaliation at states important to Trump's political base.1618 British Columbia is keeping its ban on U.S. liquor and on government purchasing from American suppliers.9

The underlying imbalance has not changed. Nearly three-quarters of Canada's exports go to the U.S., compared with about 15 per cent of American exports going to Canada.5 Carney has said the EU, China and India cannot fully replace the U.S. market.5 Business groups in both countries warn that the fight hurts everyone. The U.S. Chamber of Commerce points to 13 million American jobs tied to the North American pact, and Canada's chamber called the dispute self-defeating.18

Canada's strategy looks like patience backed by credible but limited retaliation. Ottawa answers each American move in kind, protects domestic industries where it can, and holds back its biggest options, including energy and critical minerals, for a larger confrontation. That approach is likely to face its hardest test when the January threat to autos and steel comes due.