US and Canada Blame Each Other for Collapse of Talks as Trade War Looms

The U.S. and Canada are sliding toward a broader trade confrontation after negotiations that had appeared close to producing an agreement collapsed hours before a tariff deadline.

Washington and Ottawa immediately blamed each other for the failure, exposing deep divisions over sectoral tariffs, automotive trade and Canadian sovereignty.

The breakdown triggered U.S. tariffs of 50 percent on $20bn of Canadian goods after midnight on Friday.

Canada said it would respond with dollar-for-dollar duties on U.S. products, including steel, dairy and appliances, from September 8.

Near-Deal Unravels

Only days earlier, both governments had signaled that an agreement was within reach.

President Donald Trump announced a “DEAL” late Tuesday and postponed the tariff deadline by three days.

Canadian Prime Minister Mark Carney said negotiators had made “substantial progress.”

Dominic LeBlanc, Canada’s minister responsible for U.S.-Canada trade, and U.S. Trade Representative Jamieson Greer appeared together the following day and said several disputes had been resolved.

By late Friday, that optimism had disappeared.

Greer said Canada had withdrawn after introducing new demands. He did not specify them, but said Ottawa had rejected terms offering “the best treatment of any major exporter to our market”.

Carney gave the opposite account. He said Canada had negotiated “in good faith” before Washington introduced new conditions that were “unfair” and infringed on Canadian sovereignty.

“In short,” Carney said, “they asked too much, and they offered too little.”

Tariffs and Retaliation

The immediate result is another escalation in a trading relationship worth almost $900bn a year.

The new U.S. tariffs cover about 5 percent of Canadian exports to the American market.

Carney said Ottawa would respond on September 8 with equivalent tariffs on U.S. goods.

“Last spring, I warned that America is trying to break us so they can own us and I promised that that will never, ever happen,” he said in Ottawa on Saturday.

“We are keeping that promise. Canada is becoming stronger and less dependent on America.”

Greer defended the U.S. position on Saturday, arguing that Canada had already enjoyed favorable access and could have secured further tariff reductions.

Trump later accused Canada of imposing heavy tariffs on American farmers and said the country “wants the benefits of being a State, without being one.”

Sectoral Disputes Derail Talks

The negotiations had centered in part on reducing existing U.S. duties.

Canada sought to prevent the latest tariffs while securing substantial relief from earlier measures. Ottawa was prepared to remove retaliatory tariffs on U.S. autos, steel and aluminum, while Carney planned to press provincial governments to lift restrictions on American alcohol.

The U.S. had considered cutting steel and aluminum tariffs from 50 percent to 25 percent and reducing headline automotive tariffs from 25 percent to 15 percent, according to people familiar with the discussions.

Those terms later ran into resistance inside the U.S.

Some American aluminum producers argued that duties on primary metal could be lowered while 50 percent tariffs remained on downstream products.

Commerce Secretary Howard Lutnick supported a harder line on the sectoral measures, according to people familiar with the talks.

Washington then proposed retaining higher tariffs on some downstream metal products and imposing quotas on steel eligible for lower rates.

Those competing positions helped unravel the broader sectoral agreement.

Carney said the Canadian delegation had maintained a common position throughout the negotiations but added that “you cannot say that about the United States administration.”

Sovereignty Emerges as Flashpoint

Carney said the final U.S. proposals extended beyond tariffs.

He alleged that Washington sought changes affecting Canadian protections for French language and culture, as well as restrictions on Canada’s ability to negotiate trade agreements with other countries.

“It’s a power play,” Carney said, adding that the dispute had become “a question of sovereignty.”

Automotive trade was another major obstacle.

Canada and Mexico have pressed the U.S. to expand tariff rebates currently tied to U.S. content so that they cover North American content more broadly. American officials resisted the proposal.

Carney also said U.S. negotiators sought, at the final stage, to exclude medium and heavy trucks from the proposed automotive tariff relief.

He said the change would have made Canadian vehicle production increasingly uneconomic.

Relations Deteriorate Further

The failed negotiations deepen an already severe deterioration in relations between the two neighbors.

Since returning to the White House, Trump has imposed tariffs on Canadian goods, questioned Canada’s viability as an independent country and repeatedly suggested it should become the 51st U.S. state.

The measures and rhetoric have provoked a backlash in Canada, including boycotts of American goods and travel.

Carney on Saturday described the tariffs as an “attack” on Canada.

“You’re at war when you get attacked,” he said. “And we got attacked.”

The latest confrontation also renews uncertainty over the future of USMCA, the trade agreement negotiated during Trump’s first term.

What had appeared to be a narrow path toward de-escalation has instead produced another round of tariffs, retaliation and mutual accusations, leaving the U.S. and Canada closer to an outright trade war.