Canada’s Counter-Tariffs Take Effect as Trump Threatens to Escalate

Canada’s retaliatory tariffs on US goods took effect after midnight on Tuesday^1,8. The measures cover more than 700 US products⁷. Published estimates of the value differ: Semafor put the affected trade at $27.6 billion¹, Business Plus at $27.2bn⁹, the Financial Times at C$27bn, or US$20bn¹¹, and the BBC at $20bn of American products².

Rates vary by product line. The tariff cost ranges from 15% to 50%, with items such as forklifts and industrial molds carrying 15%³. Steel, aluminium and iron products from the US now face a 50% Canadian tariff⁸. Many plastics and plastic products, including resins, film, bags, bottles and packaging, face a 50 per cent tariff⁴.

Why it matters to investors

The BBC framed the escalation as jeopardising the stability of the world’s largest bilateral trading relationship². Prime Minister Mark Carney said Canada is ready to sit down and strike a deal when the Americans are ready¹⁰. US Trade Representative Jamieson Greer characterised the state of talks differently¹⁰, and noted that the US government is aware French language protections are sensitive and important⁹.

The cost estimates are regional as well as national. The Financial Accountability Office of Ontario estimated the new tariff regime will cost 119,000 local jobs in 2026⁵. In Quebec, the plastics categories carrying the top rate are inputs whose cost retailers would pass on⁴. Canada is bracing for a prolonged trade war rather than a quick settlement^2,10.

What to watch

Escalation is the first variable. President Trump has called for a boycott of Bombardier, the Canadian business jet manufacturer, as Ottawa imposed its retaliatory duties¹¹. The New York Times noted that Trump has frequently made dramatic threats during trade negotiations that went unrealised, such as floating the idea of a 100 percent tariff⁶. Canadian tariffs on billions of dollars of US goods are now in force regardless of what follows³.

Monetary policy is the second. The Bank of Canada held its overnight rate at 2.25 percent on September 2, with the Bank Rate at 2.5 percent and the deposit rate at 2.20 percent⁷. That decision was taken before the counter-tariffs took effect, which leaves the central bank to assess the price impact after the fact^7,8. Ottawa’s measures were in force from just after midnight, so the first full trading day of the week was also the first day of two-way tariffs across the relationship^1,8,10.