Canada and the U.S. Are Slapping New Taxes on Each Other's Products — Here's What's Happening
The federal government will put new taxes on $27.6-billion worth of American products starting Sept. 8. It's responding to a decision by U.S. President Donald Trump, who over the weekend placed a 50-per-cent tax on roughly $28-billion in Canadian goods after trade talks broke down late Friday (The Globe and Mail).
These taxes are called tariffs — a tariff is a fee charged at the border when goods cross from one country into another. When one country raises tariffs, the other often responds with its own, which is why these are called counter-tariffs. Think of it like a toll booth: the higher the toll, the more expensive it is to bring products across the border, and that extra cost usually gets passed along to shoppers.
Prime Minister Mark Carney suspended trade negotiations with the United States following the breakdown and pledged to match the U.S. move dollar for dollar (Reuters). Finance Minister François-Philippe Champagne told reporters the counter-tariffs are "dollar-for-dollar and rate-for-rate" and will protect workers, farmers, families and businesses (The Globe and Mail).
Ottawa is targeting more than 700 U.S. items. Most carry fees of 25 or 50 per cent, with a small number at 15 per cent. Canada raised the fee on steel and aluminum, plus products made from those metals, to 50 per cent from 25 per cent. After steel and aluminum, the biggest hits fall on machinery, paper, electrical equipment and seafood. The list also reaches everyday consumer goods: dishwashers, refrigerators, furniture, lighting, golf clubs, motorcycles, video game consoles and smartphones (The Globe and Mail).
On the American side, Trump's new 50-per-cent tariffs cover electronics, plastics, paper, furniture and home appliances, among other Canadian products. The measures reach about 5 per cent of Canadian exports, with the impact concentrated in Ontario, Quebec and British Columbia. Canadian industries considered vulnerable include softwood lumber (The Globe and Mail; Reuters).
Alongside the tariff response, Ottawa outlined a $7.5-billion support package for workers and businesses, including easier access to Employment Insurance and business loan programs (The Globe and Mail). This comes on top of more than $25 billion set aside in Budget 2025 for workers and businesses affected by U.S. tariffs and trade disruptions (Government of Canada.
The current round of retaliation builds on measures Canada first imposed on March 13, 2025, when Ottawa placed 25-per-cent tariffs on $29.8 billion in U.S. imports. Those initial counter-tariffs followed the U.S. "Liberation Day" tariff announcements in early April 2025, which triggered retaliatory duties from several countries (Global Affairs Canada; Government of Canada). Ottawa had also extended temporary tariff relief — meaning importers could get some fees refunded — until June 30, 2026, for U.S. goods used in Canadian manufacturing (Department of Finance Canada).
A Bank of Canada study of Ottawa's earlier counter-tariffs found that prices for targeted items rose by about 6 per cent, with roughly a quarter of the 25-per-cent fee passed through to consumers. At the peak of the price shock, the counter-tariffs added about 0.3 per cent to inflation (The Globe and Mail). Those findings reflect the earlier round of 25-per-cent duties. The escalation to 50 per cent on key categories will test whether the cost passed on to shoppers rises at the same rate, or whether importers end up absorbing more of the hit themselves.
The broader context here is how fast things have escalated. When Canada first imposed retaliatory tariffs in March 2025, the U.S. duties were at 25 per cent and the two sides were still talking. The jump to 50-per-cent American tariffs, applied over a weekend after talks collapsed Friday, means there's no chance of a negotiated settlement before Sept. 8, when Canada's response takes effect. The CUSMA framework — the trade agreement between Canada, the U.S. and Mexico — exempts Canadian automobile and auto parts exports from U.S. national-security tariffs, so the auto sector is not directly exposed to the latest U.S. measures, even as metals, machinery and consumer goods bear the brunt (Global Affairs Canada).
For affected businesses, the two-week window before the counter-tariffs take effect on Sept. 8 is the main consideration. Importers will need to weigh the relief program, which covers goods used in manufacturing, against the new duties on finished consumer products. The $7.5-billion support package and the Budget 2025 allocations together signal that Ottawa is preparing for a sustained period of mutual escalation rather than a quick resolution. The Bank of Canada's inflation findings from the earlier round suggest the consumer impact, while measurable, was modest at 0.3 percentage points; the move to 50-per-cent rates on both sides of the border will be a stiffer test.
