Canada's retaliatory tariffs on US goods took effect just after midnight on Tuesday as Canadian Prime Minister Mark Carney increased economic pressure on his country's biggest trading partner after negotiations collapsed last month, intensifying an 18-month-old trade war.

The counter-tariffs cover US$20 billion of US goods, with duties ranging from 15 percent to 50 percent across products from steel and furniture to clothing and electronics.

The dollar-for-dollar retaliation marks an escalation in the dispute between the neighbouring countries, and US and Canadian officials have traded blame for scuttling a deal that seemed close to fruition two weeks ago.

The rising tensions create uncertainty about the broader US-Mexico-Canada (USMCA) free trade agreement, which is up for annual reviews after US President Donald Trump declined to extend it for another decade.

"What we are worried about is an escalatory spiral," said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a member of Carney's advisory committee on bilateral US economic relations.

"But at the same time, we totally understand that the prime minister needs to find areas of leverage," Harvey said.

Trump's tariffs implemented last month hit sectors including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment, covering US$20 billion, or five percent, of Canadian exports to the United States.

According to Canadian and US government data, Canada has shipped almost 68 percent of total exports to the United States this year, out of which roughly 80 percent moved duty-free due to exemptions under the USMCA pact.

Protections under the agreement have provided the domestic economy some resilience.

The new tariffs, imposed under a Depression-era US law, do not allow Ottawa to exercise USMCA exemptions.

Concerns about the USMCA's future have fuelled uncertainty about investment and growth, as Canada wages a trade war against an economy 13 times its size.

Polls show Carney has broad support from Canadians, but it could disappear within months as the consequences of the trade war sink in, according to political analysts.

A government source said there are currently no talks between the two sides among ministers or government officials.

"The Canadian government needs to keep channels open to the United States and not go overboard in terms of rhetoric and reacting to the rhetoric from the American side, while waiting for the American decision-making process to come back to economics," Harvey said. (Reuters)





Edited by Tony Sabine