Bitter syrup US and Canada enter new phase of trade war

The United States is preparing its most sweeping tightening of trade measures against Canada in the past year and a half. Beginning on August 19, Washington plans to impose 50% tariffs on a broad range of Canadian goods, from lumber and cement to alcoholic beverages and hockey equipment.

The most notable aspect of the new package is that, for the first time, the restrictions will apply to products that had previously been protected under the United States–Mexico–Canada Agreement (USMCA/CUSMA). Ironically, it was Donald Trump who, during his first presidential term, championed the agreement, hailing it as one of the greatest trade achievements in U.S. history.

The current U.S. administration is now revisiting many of the principles embedded in that very agreement. In July, Washington declined to extend the deal in its existing form and initiated its annual review mechanism. Formally, the USMCA remains in force until 2036. For businesses, however, this signals that the predictability that has long underpinned North American trade is gradually giving way to uncertainty.

The trade war between Canada and the United States has been ongoing since early 2025. Following his return to the White House, Donald Trump has steadily used import tariffs as his primary tool of pressure on Ottawa. At the heart of Washington's current grievances are both long-standing trade disputes and new points of contention that have emerged since the conflict began.

Foremost among them is the U.S. demand that Canada open its dairy market, which remains protected by strict import quotas and steep tariffs on products exceeding those quotas. This issue was already one of the most contentious during the negotiations that led to the USMCA.

The White House has also criticised certain aspects of Canada's automotive policy. Since the trade war began, the dispute has been further aggravated by the boycott of American alcoholic beverages introduced by several Canadian provinces in retaliation for Washington's measures. And, of course, there are also U.S. accusations that Canada has not done enough to combat fentanyl smuggling.

As the conflict escalated, U.S. trade restrictions were extended to cover steel, aluminium, automobiles, lumber, copper, and a wide range of other products. Ottawa responded with reciprocal tariffs on selected American imports, although negotiations between the two countries never fully came to a halt. At the same time, the political rhetoric grew increasingly confrontational.

Donald Trump described the Canadian government as "nasty" and later claimed that the neighbouring country has been "very, very tough on us over the years" and "without us, there's no way they can survive." The broader pattern suggests a strategy of gradual economic pressure, with the current U.S. administration treating international agreements not as long-term commitments but as instruments to be continuously renegotiated in pursuit of more favourable terms.

The Trump administration has adopted a similar negotiating style in its dealings with other partners. Shortly after concluding a trade agreement with the European Union, the White House resumed threatening the bloc with additional tariffs. Likewise, after announcing a civil nuclear cooperation agreement with Saudi Arabia, Washington moved almost immediately to revise some of its key provisions.

It appears that Canadian Prime Minister Mark Carney recognised this trend several months ago. Almost immediately after taking office, he began emphasising the need to reduce Canada's dependence on the U.S. market, deepen trade ties with Europe and the Asia-Pacific region, and develop alternative export routes. Recent developments have only reinforced the rationale behind this strategy.

The trade war between Washington and Ottawa increasingly appears to be evolving from a temporary crisis into a permanent feature of relations between two military and political allies in North America.