US-Canada Trade Talks Collapse Just Before Deadline, Trump’s 50% Tariffs Take Effect
Trade negotiations between the U.S. and Canada broke down late Friday night just minutes before a midnight deadline, triggering the 50% tariffs on roughly $20 billion worth of Canadian goods that Washington had threatened for weeks.
Talks Collapse Hours Before Deadline
President Donald Trump and Prime Minister Mark Carney had reached an agreement in principle earlier in the week, prompting Trump to put the new tariffs on hold until 12:01 a.m. Saturday while both sides worked out final details. But Carney said Washington subsequently tried to alter the terms of that agreement, prompting him to break off talks and recall Canada’s negotiators from the table.
According to the Toronto Globe and Mail, Carney placed the blame for the breakdown squarely on the U.S., saying in a statement that the last-minute changes to Washington’s proposed terms were "unfair, uneconomic, and called into question the reliability of any deal."
U.S. Trade Representative Jamieson Greer gave a very different account on a conference call with reporters late Friday, telling them it was Canada that caused the deal to collapse by seeking additional concessions, the Associated Press reported. Greer said, "Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk backs of other commitments by Canada have upended the careful balance reached in the past days."
Carney Promises Immediate Retaliation, Ford Backs Ottawa
Carney said Canada would respond immediately, pledging that Ottawa would match the new U.S. duties "dollar for dollar to protect our workers and businesses." It remains unclear which U.S. sectors Canada intends to target. A senior Trump administration official said Washington had no new talks scheduled and was preparing additional options to escalate if Ottawa follows through on retaliation.
Ontario Premier Doug Ford, whose province is home to Canada’s auto industry, quickly threw his support behind Carney in a post on X, offering his backing for a tariff-for-tariff response and calling for the country to present a united front. Ford had been notably quiet through much of the week’s negotiations, and his intervention signals that provincial leaders are now lining up behind Ottawa’s harder line.
The new duties, imposed under the rarely used Section 338 of the Tariff Act of 1930, hit a range of goods including hockey equipment, cement, dairy products, plywood, liquor and electrical equipment. The tariffs cover only a slice of the roughly $880 billion in goods and services the two countries traded last year, but the political fallout is expected to outweigh the direct economic hit.
A Dramatic Reversal From Earlier In the Week
The collapse marks a sharp turnaround from Tuesday, when Trump paused the same tariffs for three days, announcing on Truth Social that the U.S. and Canada "have a DEAL" pending final paperwork. Officials on both sides had voiced optimism as recently as Thursday, when Canada’s trade minister met with Greer for a further round of talks. Sources familiar with the discussions said the sides had been close to an agreement that would have lowered tariffs on steel, aluminum and autos, and potentially restored American alcohol to Canadian liquor store shelves. Auto-sector tariff credits tied to North American content remained a key sticking point throughout.
Market Reaction
The Canadian dollar had been trading near $1.39 per U.S. dollar in the run-up to the deadline as traders weighed the odds of a deal. Strategists at Monex Europe had flagged the deadline as a binary catalyst for the currency: a durable agreement could push the loonie toward $1.37, they said, while renewed escalation risked sending the pair back above the 1.40 handle.
Analysts at Commerzbank had separately cautioned that markets remained skeptical a deal would hold even if one were reached, pointing to Trump’s repeated criticism of the broader USMCA framework as a source of durability risk. With Friday’s collapse landing squarely on the escalation side of that split, currency desks are likely to reset positioning toward the weaker end of that range once trading resumes.
U.S. equity markets are closed for the weekend, so the first real test of investor sentiment will come at Monday’s open, as traders assess the odds of a broader tariff fight between the U.S. and its second-largest trading partner spilling into autos, steel and aluminum.
Image: Shutterstock/Alii Sher