Trump administration predicts US trade war 'devastating' for Canada
The United States accounts for roughly 70 per cent of Canadian exports.
Canada’s Prime Minister Mark Carney speaks with the news media after he suspended trade negotiations with the United States, in Ottawa, Ontario, Canada on Aug 22, 2026. (Photo: Reuters/Chris Tanouye)
WASHINGTON: The Trump administration on Sunday (Aug 23) warned that Canada would be "foolish" to think it could win a trade war with the United States, predicting a "devastating" impact on its northern neighbour.
Negotiations between Washington and Ottawa broke down late on Friday, putting into force new 50 per cent US tariffs impacting about US$20 billion worth of Canadian goods, or 5.5 per cent of Canadian exports to the United States.
Canada, in retaliation, said it would match US tariffs, with new levies notably targeting the US steel and dairy industries to take effect on Sep 8.
US Transportation Secretary Sean Duffy said Canada would come out worse from tussling with President Donald Trump in a trade war.
The United States currently accounts for roughly 70 per cent of Canadian exports.
"We're great trading partners, right? But Canada gets the benefit of trading with the US way more than the US gets the benefit of trading with Canada," he told the "Fox News Sunday" talk show.
"To think that they're going to go to war with Donald Trump and actually win that war with the US, I think it's foolish on their part."
He predicted that Canadian Prime Minister Mark Carney would return to negotiations "very very quickly, because it's going to be devastating for his country".
Carney was defiant on Saturday, announcing retaliatory tariffs on the US after walking away from a "bad deal" on trade as the rift between the longtime allies deepened.
"You're at war when you get attacked. We got attacked," Carney said.
Carney cited last-minute US demands that would restrict Canadian trade deals with other countries and unacceptable "threats" to the French language and Quebec culture.
Trump hit back early on Sunday, saying, "Canada wants the benefits of being a State, without being one!!!"
"They have also charged our great farmers, for many years, massive amounts of Tariffs. No more!!!" Trump added in a post on Truth Social.
"BULLY IN WASHINGTON"
The acrimony underscored the deepening rift between the close allies since Trump began his second term in January 2025 - including his repeated threats to make Canada the 51st US state.
Carney has said bilateral relations have been forever changed and that Canada must reduce its reliance on the United States.
Despite the economic fallout, he has won political support at home for his willingness to stand up to Washington since taking office two months after Trump returned to the presidency.
"We have a bully in Washington," Canadian retired teacher Stuart Edwards told AFP ON Saturday in Fort Erie, Ontario in the shadow of the Peace Bridge, a conduit for billions of dollars in annual trade with the United States.
"We're not going to put up with it, Canada isn't. We'll fight back," he said.
In the recent talks in Washington, Canada was seeking relief from Trump's tariffs on autos, steel and aluminum, which have battered the country's economy, forced job losses and strained what was once an iron-clad trade relationship.
The White House had alleged "discriminatory treatment" by Canada against US alcohol, automobile and dairy products in introducing the duties.
US Trade Representative Jamieson Greer told the New York Times on Saturday that the US had offered to reduce its tariffs on steel, aluminum and autos, as well as eliminate a recently imposed tariff on Canadian lumber.
Greer said those measures would have given Canada "the most preferential treatment of any trading partner", according to the Times.
He also said no new talks were planned with Canadian negotiators.
Trade policy analyst Deborah Elms from the Hinrich Foundation said that ultimately, nobody wins in a tit-for-tat tariff war.
“Canadian tariffs will be paid by Americans and American companies importing from Canada. So, they're going to hit Americans rather than Canadians,” she told CNA’s Asia First programme.
“And Canada will have a much harder time exporting to the US at 50 per cent tariffs. That completely ruins profit margins. If Canada retaliates, (there’ll be) additional pain on Canadians who are trying to import goods from the US.”
US trading partners elsewhere will be closely watching the dispute and what it could mean for their own negotiations with Washington.
Elms said the implications could be particularly significant for Asia, where several countries have negotiated or are negotiating trade agreements with the US containing provisions that could affect their trade with third countries.
“The question for many Asian partners is, if Canada can say no to those provisions, then are we (also) allowed to say no? And if we’re required to adjust our trade policies based on the whims of Washington, then that's also problematic,” she said.
The escalating dispute could also intensify Canada's efforts to diversify trade away from the US, said analysts.
“I think we will see an acceleration away from the US market at a level that we had not anticipated two years ago, (before Trump’s return to the White House),” Elms said.
