The United States and its younger sibling and longtime neighbor, Canada, have broken off trade negotiations.

Here's how it unfolded. Previously, Trump hinted that "the deal with Canada was nearly complete—just a signature away." But in the final days, the U.S. suddenly imposed new conditions. Canadian Prime Minister Justin Trudeau slammed the table: "You're asking for too much and offering too little"—unfair, unprofitable, and undermining the credibility of the agreement. As a result, Canada announced a suspension of talks, starting September 8, launching a "tit-for-tat" response: if the U.S. imposes a 50% tariff on $20 billion worth of Canadian goods, Canada will retaliate with equivalent tariffs on American steel, dairy products, home appliances, agricultural machinery, pulp and paper, electronics, and more—dollar for dollar.

The U.S. Trade Representative, Katherine Tai, denied responsibility, claiming that the U.S. had originally agreed to significantly reduce tariffs on steel, aluminum, automobiles, and timber, and even offered Canada "most-favored-nation" treatment. It was Canada that reneged at the last minute, raising new demands and breaking the fragile balance. Both sides are now giving conflicting accounts—but the outcome is the same: tariffs are going into effect.

What exactly did the U.S. impose this time? Based on Section 338 of the 1930 Smoot-Hawley Tariff Act—the U.S. President can directly impose up to a 50% tariff on nearly 500 types of Canadian goods, including red wine, hockey sticks, cement, beer, milk, plywood, among others—if they are deemed to be "discriminating against American business." This provision has no expiration date, unlike other tariff laws that are often struck down by courts.

The actual tariffs affect about $20 billion worth of Canadian exports to the U.S., accounting for only roughly 5% of total U.S. purchases from Canada. So while prices may rise slightly for specific items, it won’t cause an immediate doubling of milk prices at American supermarkets. The real danger lies in the signal: a full-scale trade war has reignited.

The core issues behind the dispute boil down to a few key points.

First, automobiles: The U.S. levies a 25% tariff on vehicles made in Canada, calculated only on non-U.S. components. The U.S. previously softened this to 15%, but Trudeau insisted that medium- and heavy-duty trucks (like Ford’s large pickup trucks built in Ontario) must also be exempt—something the U.S. refused. Trudeau said, "That makes no sense."

Second, dairy: Canada allows some U.S. dairy products in, but under strict quota limits; exceeding them triggers massive tariffs. Trump has long complained this amounts to a backdoor closure, demanding Canada lift the quotas.

Third, alcohol: Some Canadian provinces have pulled U.S. liquor off shelves, which angered the U.S. While Canada had previously agreed to put them back, it later withdrew that promise.

Fourth, critical minerals: The U.S. wants exclusive priority access. Trudeau responded clearly: "No exclusivity will be granted."

Canada isn’t just taking hits. Trudeau stated that over the past 18 months, Canada has already spent nearly CAD 25 billion helping workers and businesses—and this round will bring further investment. He repeatedly emphasized, "Canadians control their own destiny," and "America miscalculated if it thinks it can divide us." Domestic public opinion backs him up: seven in ten Canadians believe the trade war has already affected household spending, yet even more say they’d rather retaliate than give in.

In the short term, targeted goods like wine, cement, paper, appliances, and certain dairy products will become pricier—but their overall volume is small, not enough to trigger broad inflation. In the medium term, North America’s auto supply chain will suffer the most—a single vehicle parts cross borders seven or eight times, and stacked tariffs could force factories to either raise prices or relocate production lines.

In the long run, the USMCA was already due for renegotiation. This conflict has essentially created a deep crack in the trust between "North American family members": Canada is now seriously considering reducing dependence on the U.S., while the U.S. treats tariffs as a permanent lever.

Original article: toutiao.com/article/1874263946831872/

Disclaimer: The views expressed in this article are solely those of the author.