Canada counter-tariffs hit US steel, dairy after talks collapse

A trade deal that never got signed

Canada and the United States are now hitting each other with more than tariffs. They are also making competing claims about who walked away from a deal. On August 25, Ottawa published a list of more than 700 American products it planned to hit with "dollar-for-dollar" counter-tariffs. The list was a direct reply to President Donald Trump's newest import taxes, and it pushed the two neighbours further into a bitter trade war.2 The surtaxes took effect at 12:01 a.m. on September 8, at rates of 15%, 25% or 50%.15 By late September, Washington had answered with something stronger than a tariff: outright import bans on some Canadian goods.23

The collapsed negotiation explains the anger on both sides. Trump signed three proclamations on July 20 under Section 338 of the Tariff Act of 1930, setting a 50% duty on Canadian goods. On August 18 he paused them for three days, saying a deal existed "subject to the finalization of documents." The documents were never finalized.22 U.S. Trade Representative Jamieson Greer said Canada "declined to finalize the trade deal under the terms agreed earlier this week," and blamed new demands and walk-backs from Ottawa.22 Prime Minister Mark Carney said the opposite: Washington made last-minute changes that were "unfair, uneconomic," and that cast doubt on whether any deal could be relied on. He then called Canada's negotiators home.27 The duty took effect at 12:01 a.m. on August 22.22

The White House later said Canada had "reneged on its commitment" and stopped negotiating in good faith. Ottawa rejects that version of events.21 Neither account can be proven from the public record. The more useful point is that both governments accept a near-final deal existed and fell apart over its final terms. Carney has also said U.S. demands during the talks showed Americans wanted to "destroy our major industries."2 That remark makes it unlikely the dispute will be settled by quietly reviving the August framework.

What Canada actually taxed

The products named on announcement day were deliberately ordinary. They included live and frozen fish and shellfish, cheese, honey, cosmetics, carpets, toilet paper, clothing, household appliances, smartphones, video game consoles, motorcycles, trailers, and fishing rods.7 Many of the items closely mirrored goods Washington had just put at 50%. Steel and aluminum products, which already face a 50% U.S. sectoral tariff, were also included.7 Many Canadian rates on American goods doubled from 25% to 50%, and steel and aluminum make up the largest share of the new measures.6

The final legal orders show the policy became narrower between announcement and enforcement. On September 7, Ottawa issued two orders-in-council covering C$27.6 billion of U.S. imports.11 The first sets 15%, 25% or 50% surtaxes on goods including dairy, appliances, farm equipment, pulp and paper, electronics, clothing, and furniture.11 The second raises most existing surtaxes on U.S. steel and aluminum from 25% to 50%. Only a few aluminum and steel items stay at 25%.11 The 15% tier includes air conditioners, forklifts, and harvesting machinery. The 25% tier includes cheese, sawn wood, toilet paper, refrigerators, dishwashers, locomotives, and trailers. Milk and cream sit in the 50% tier.11

This is where the coverage starts to disagree. The "more than 700 targets" figure comes from the first-day announcement.2 One trade-compliance tracker reports that Canada revised the list on August 26, cutting it from 874 items to 629. Fish and seafood came off; copper wire, glass containers, and gypsum tiles went on at 50%.28 A logistics firm describes the final list as more than 600 items.15 So the headline about Canada targeting fish is accurate about the announcement but probably outdated for the version that took effect. Readers should treat the 629-item, C$27.6 billion list as the operative one. Reports also differ on currency. One outlet gives the counter-tariffs as US$27.6 billion21, but the legal analysis and the timeline compiled from government data give the figure in Canadian dollars.1120

Ottawa also built in relief. Goods in transit on September 8 are exempt. A remission process remains open for imports tied to public health, medical care, and Canadian manufacturing and food packaging.11 The government has announced C$7.5 billion in support for affected workers and businesses, on top of more than C$25 billion in earlier tariff aid.13

Washington escalates from tariffs to bans

Trump moved quickly. On August 24, before Canada had published its list, he said tariffs on Canadian cars, trucks, auto parts and steel would rise to 50% from January 1, 2027.2 Carney said that plan would "gradually dismantle" Canada's auto production.2 Hours after Canada's surtaxes took effect, Trump signed five more Section 338 proclamations. Three of them ban, rather than tax, Canadian packaged alcohol, whey and molasses products, and motorcycles with engines over 800cc.27 The others changed the 50% list. Furniture, paper, and certain cheeses were added. Salt, Portland cement, and some whiskies were removed.30

The bans began on September 29. One analyst estimated they cover $967 million of Canadian imports, based on 2025 data.23 Coverage of how much that matters is split. Some outlets presented the bans as a major escalation. Others note the amount is tiny against roughly $880 billion in yearly two-way trade.24 Carney himself called the new U.S. measures "relatively modest" compared with earlier steps.28 The better reading is that the bans matter for the precedent more than the dollars. Washington has shown that Section 338 can be used to shut goods out entirely, not just to tax them. That raises the stakes for any further Canadian retaliation.

The legal and political fault lines

Section 338 is the key to this round. The Depression-era law had never been used before. It lets a president impose duties of up to 50% on countries found to discriminate against U.S. commerce.2 It also ignores the existing trade agreement: a valid USMCA certificate of origin does not protect a covered Canadian product.27 Washington exempted energy, potash, fish, critical minerals, and goods already under Section 232 tariffs.30 That leaves Canada's biggest resource exports mostly untouched for now.

The Montreal Economic Institute, a free-market think tank, argues that Canada's retaliation is a strategic mistake. Its view is that the Section 338 tariffs rest on weak legal ground and could be struck down by U.S. courts. But matching tariffs that explicitly discriminate against American goods could weaken the main argument against them, which is that Canada does not discriminate in the first place.17 The institute also cites polling: an Ipsos survey in September found 57% of Americans oppose tariffs on Canada and 20% support them.17 The argument is coherent, but it asks Ottawa to bet on U.S. courts while its industries take the damage. No Canadian government facing a 50% tariff was likely to accept that.

At home, Carney has more pressure to escalate than to back down. Former Prime Minister Jean Chrétien supported the counter-tariffs and floated export taxes on oil, gas, electricity, and potash. Conservative Leader Pierre Poilievre asked Ottawa to disclose what the retaliation will cost Canadian households.13 Ontario Premier Doug Ford has said his province is ready to cut off electricity and critical minerals if things get worse.2

No urgency in Washington

The imbalance in urgency may matter most. Greer told CNBC the U.S. is "comfortable with where we are" and that there is "no urgency on our side."21 Carney says Canada is ready to negotiate in good faith toward an arrangement that respects both countries' sovereignty.21 Some communication continues: Greer and Dominic LeBlanc, Canada's minister for U.S. trade, have spoken and are expected to talk again.26

The early trade data is hard to interpret. Canada's August exports to the U.S. rose 8.1% and imports fell 2.5%, which widened Canada's surplus. One analysis says this probably reflects exporters rushing shipments ahead of the tariffs rather than any real improvement.14 There is also a bigger deadline looming. On July 1, the U.S. declined to renew USMCA in its current form, which triggers annual reviews through 2036.14 That gives Washington a reason to keep tariff relief conditional and use the review as leverage on dairy, energy, and industrial policy.14

Ottawa has matched Washington's tariffs product for product. But each time Canada has hit back, Washington has answered with a stronger tool, first the threatened 50% auto tariffs and then the import bans.30 Unless Canada makes a concession on dairy or the U.S. exempts autos, the likely path is not a clean break. It is a slow fragmentation in which USMCA still exists on paper while tariffs undermine the integrated North American market.14