US-Canada trade war escalates as Trump threatens tariff hike on autos after Carney vows to retaliate
EPAPresident Donald Trump has threatened to hike US tariffs on automobiles originating in Canada, as the trade war between the two neighbours continues to heat up.
Trump said on Monday that he will increase tariffs on Canadian cars and trucks, as well as auto parts, from 25% to 50% as of 1 January.
It comes after US-Canada trade talks collapsed late last week, with each side accusing the other of making unreasonable last-minute demands.
Prime Minister Mark Carney called Trump's latest levy threat unsurprising and accused the president of wanting to destroy Canada's auto industry. He added that Canada is ready to resume talks if the US comes with the "right attitude".
The war of words followed several US and Canadian officials saying that talks are suspended with no set date to resume.
Trump's threat was the latest escalation after Canada walked away from trade negotiations late Friday night, moments before a US-imposed deadline that would add a 50% levy on nearly $20bn (C$28bn; £14bn) of Canadian imports.
The collapse in talks marked a significant change in tone from earlier in the week, when both sides appeared optimistic that a new US-Canada trade deal could be reached.
Canadian officials have said that the US introduced last-minute demands that were "unacceptable", including a clause limiting which countries Canada could sign trade deals with.
US officials, meanwhile, said that it was Canada that introduced last-minute changes. "They wanted more," US trade representative Jamieson Greer said in an interview with CNBC on Monday.
The breakdown led to growing tensions as both sides publicly dug in their heels.
On Monday, Trump's tariff threats to Canada's auto industry followed Carney declaring the country would counter his levies with reciprocal tariffs on US goods "dollar for dollar".
Carney said he was focused on supporting Canadian businesses impacted by new 50% US tariffs after the Friday deadline expired, as well as building infrastructure to diversify Canada's trade, which historically has relied heavily on the US.
Carney announced funding of C$11bn ($7.95bn; £5.83bn) to build six icebreakers at a Quebec shipyard for the Canadian Coast Guard that will replace its medium and heavy ageing fleet.
The icebreakers will be used to open winter shipping routes through Canada's northern and Atlantic waters.
Meanwhile, Ontario's outspoken premier, Doug Ford, whose province is home to Canada's auto manufacturing industry, responded to Trump's tariffs and threats by telling the US president to "kiss my ass".
Ford also suggested that Canada should charge the US extra for its oil and gas, as well as electricity and critical minerals, adding that he will be speaking to Carney on ways to "fight back".
His comments appeared to catch the attention of Trump, who in a Truth Social post accused Ford of "bluster" and wrote: "Someone should get these clowns to 'fall in line' or, the consequences for Canada will be far WORSE!".
Canada accounts for 60% of total US crude oil imports and close to 100% of US natural gas exports, according to Canadian government data.
Businesses on both sides have warned that they stand to be impacted by the new wave of US tariffs on Canada, as well as the "dollar-for-dollar" retaliatory tariffs that Canada plans to impose on 8 September.
The trade war also put into question the future of an existing North American trade pact, known as the UMSCA, that was signed by Trump in his first term with Canada and Mexico.
During a mandatory review this summer, both Canada and Mexico said they want the USMCA extended for another 16 years. The US, however, said it will not renew in its current form.
The pact underpins $1.6tn in North American trade.
Experts with Oxford Economics warned on Monday that a dismantling of USMCA could have dire economic consequences for Canada.
"While unlikely, escalating trade tensions means the risk of the USMCA unravelling has increased, which would plunge Canada into recession and leave it on a permanently lower growth path," warned Head of Canada Economic Tony Stillo and Senior Economist Michael Davenport.
