Canada's $20 billion retaliatory tariffs against the US take effect; Carney says he is not seeking an escalation of the trade war but aims to accelerate the reduction of dependence on the US.

The trade war between the US and Canada continues to escalate.

On Tuesday, September 8th local time, Canada's retaliatory tariffs of 15% to 50% on approximately $20 billion worth of U.S. goods officially took effect, covering hundreds of products including steel, aluminum, furniture, clothing, home appliances, and electronics. Some U.S. steel and aluminum products, previously subject to a 25% tariff, saw their tariffs increased to 50%. This is Canada's "dollar-driven" retaliatory measure against the 50% tariffs imposed by the U.S. on August 22nd.

On the very day the retaliatory tariffs took effect, Canadian Prime Minister Mark Carney addressed the nation, emphasizing that Canada "does not seek to escalate" the trade conflict with the United States, but must take action to protect its workers and businesses. He also stated that Canada will accelerate infrastructure development, expand foreign trade relations, and reduce its economic dependence on the United States, adding that the pattern of heavy reliance on the US market that has existed for decades is coming to an end.

US and Canadian officials are maintaining communication, but there is still a significant distance to go before resuming formal trade negotiations. Reports indicate that Canadian Trade Minister LeBlanc and US Trade Representative Greer scheduled a call on Tuesday. The Canadian side expects the call to primarily discuss how the US is prepared to respond to Canada's retaliatory tariffs that took effect that day, rather than directly addressing the core trade disputes that triggered this escalation of the trade war. Canadian officials revealed that the two had several informal communications over the weekend, and Tuesday's call would also discuss "next steps."

Meanwhile, US President Trump has continued to pressure Canada. Trump has threatened to restrict Canadian aircraft manufacturer Bombardier from selling planes in the US, and previously threatened to raise tariffs on Canadian cars, trucks, and auto parts to 50% starting next year. With Canada's retaliatory measures now in effect, whether the US will take further trade measures has become the focus of market attention in the next phase.

Carney: The countermeasures are not intended to escalate the conflict, but to protect Canada.

Carney said on Tuesday that he "does not believe in escalating the conflict" because it is "not constructive," but Canada cannot continue to allow U.S. goods to enter Canada duty-free while the U.S. imposes tariffs on Canadian exports.

“Our tariffs are necessary,” Carney said, “to protect Canadian workers, businesses and communities.”

He also acknowledged that the trade war would not be easy. Carney stated that the impact of U.S. tariffs would have a more severe effect on some Canadians, and that this effect was, to some extent, "intentional."

Therefore, the Canadian government is taking two measures: on the one hand, it is increasing the cost of U.S. goods entering the Canadian market through retaliatory tariffs, and on the other hand, it is preparing to provide support to affected businesses and workers.

Recent media analysis suggests that the new trade conflict may have a greater impact on Canada because of its smaller economy and heavy reliance on the US market. Some Canadian small and medium-sized enterprises may even be forced to effectively withdraw from the US market due to the 50% US tariffs.

Carney bets on "de-Americanization": Expanding duty-free markets in the next six months

Rather than simply emphasizing retaliatory tariffs, what is more noteworthy in Carney's speech on Tuesday is Canada's adjustment of its future economic course.

Carney stated that Canada must reduce its reliance on the U.S. single market and accelerate infrastructure development and trade diversification. He pointed out that while the deepening integration of the Canadian economy with the U.S. over the past 40 years has brought benefits, it has also led to over-reliance on the U.S. market.

“That era is over,” Carney said.

Carney also announced that Canada will double the number of people covered by duty-free trade to 3 billion in the next six months, while accelerating large-scale infrastructure projects and expanding free trade relations with other countries.

He also emphasized that the actions of Canadian businesses and consumers are equally important, including buying more Canadian products and traveling domestically.

This means that the Canadian government is attempting to transform the current trade conflict into a driving force for economic restructuring. For the Canadian economy, which is highly dependent on the US market, diversifying trading partners may mean higher short-term adjustment costs, but judging from Ottawa's policy stance, reducing dependence on a single US market has become an important part of addressing the current trade friction.

US and Canadian officials are maintaining communication, but formal negotiations have not yet resumed.

According to a report by Canadian media outlet CBC, officials from the United States and Canada are still in contact, but have not yet begun formal negotiations on the core issues that led to the escalation of the current trade war.

Canadian Trade Minister Robert LeBlanc and U.S. Trade Representative David Greer scheduled a phone call on Tuesday. A Canadian source familiar with the discussions said the call is expected to focus on how the U.S. will respond to the Canadian retaliatory tariffs that took effect that day, rather than immediately resolving the fundamental issues in the trade impasse between the two countries.

However, the Canadian side also expects the two to discuss "next steps." Another source revealed that LeBron and Greer had several informal exchanges over the weekend.

LeBron's press secretary, Gabriel Brune, told CBC that Canadian and U.S. officials have been communicating on a range of issues, but "there are no formal trade negotiations at this stage."

Therefore, the current situation is closer to "maintaining communication and assessing the next steps" than to a genuine restart of negotiations. Canada and the United States are still in contact, but there is still a considerable distance to go before the two sides sit down to formally resolve the trade impasse.

Trump exerts further pressure: Bombardier may become the next "card".

As Canada's countermeasures are implemented, Trump's latest threats are also beginning to attract market attention.

On Monday, Trump hinted that he might ban Canadian aircraft manufacturer Bombardier from selling planes in the United States unless the company moves more production there. US media pointed out that Bombardier has a vast US supply chain, with approximately 2,800 suppliers and production and supply chain operations in Texas, Iowa, and other states.

This threat is particularly concerning because Bombardier is a highly cross-border enterprise, with its aircraft production involving numerous U.S. suppliers and parts. If Trump further restricts its access to the U.S. market, the impact could extend beyond Canadian companies and potentially affect the entire U.S. supply chain.

Trump had previously threatened to raise tariffs on Canadian cars, trucks, and auto parts to 50% starting January 1, 2027. At the same time, he signed an executive order renaming Lake Ontario on official U.S. maps as "Lake of America," further compounding the trade friction between the U.S. and Canada with diplomatic and political factors.

Tariffs have shifted from a bargaining chip to a real cost, putting pressure on both the US and Canadian economies.

The immediate context of these countermeasures was the sudden breakdown of US-Canada negotiations on August 21.

Starting August 22, the United States imposed a 50% tariff on approximately $20 billion worth of Canadian goods under Section 338 of the Tariff Act of 1930. The tariffs covered a wide range of categories, including cosmetics, beer, winter clothing, wooden furniture, and cement, but did not cover Canada's most important resource exports, such as crude oil, potash, and critical minerals. Canada subsequently announced retaliatory tariffs of roughly equivalent value in U.S. goods.

Canada's retaliatory tariffs cover approximately 6% of US exports to Canada, with rates ranging from 15% to 50%; among them, the tariff rate on some US steel and aluminum products has increased from 25% to 50%. While the overall trade volume is not the largest in terms of scope of this new round of tariffs, the steel, automotive, manufacturing, and consumer goods industries are likely to be more directly impacted due to the high degree of integration between the two countries' supply chains.

The greater risk is that tariffs are shifting from bargaining chips to actual costs that businesses have to bear.

Media analysis suggests that if high tariffs persist, Canadian small and medium-sized enterprises (SMEs) may be the first to be affected; while in the United States, states like Michigan and Ohio, which have close trade ties with Canada, could also be impacted. The high degree of economic integration between the two countries makes it difficult for tariffs to be borne solely by trading partners, but rather they are likely to be redistributed between the two economies through supply chains, business costs, and consumer prices.

Carney is therefore attempting to transform the current trade conflict into a driving force for Canada's economic restructuring. He stated that over the next six months, Canada will double the size of its duty-free market coverage to 3 billion people and accelerate infrastructure investment and the establishment of free trade relationships with other countries.

For Canada, this means that the retaliation is not merely a short-term action against US tariffs, but rather part of its efforts to reduce economic dependence on the US and expand its trading partners. For the US, with sectors such as automobiles and aviation also drawn in, whether the US-Canada trade war will extend beyond tariffs to broader market access restrictions remains a major uncertainty in bilateral relations.

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