What to know about Trump's tariffs on Canadian goods and the tensions between both countries

CHICAGO (AP) — After trade negotiations fell apart at the last minute, the 50% tariffs that U.S. President Donald Trump imposed on dozens of Canadian imports took effect Saturday.

The new levies are expected to affect approximately 5% of Canada's annual exports to the United States — around $20 billion worth of goods ranging from hockey sticks to agricultural products. Canadian Prime Minister Mark Carney quickly pledged that his government would implement "dollar for dollar" retaliatory measures beginning September 8.

Meanwhile, additional threats have been piling up. Ontario Premier Doug Ford told The Associated Press on Monday that "everything is on the table," noting that his province would be ready to cut off electricity and crucial minerals to the United States if the trade war worsens. At the same time, Trump hinted that his administration could also increase its tax on Canadian automobiles next year.

The United States and Canada used to have one of the most enduring trade alliances in the world, but the latest escalation of the crisis pushes the North American neighbors deeper into a rift that has kept both countries on edge throughout Trump's entire second term. Higher tariffs raise costs for businesses and almost always end up hitting households in the form of higher prices.

Here is what we know.

What goods are affected? Again, the 50% tariffs imposed by the United States are expected to affect $20 billion worth of Canadian goods.

Canada sends the vast majority of its goods exports to U.S. territory — 72% last year — and the Trump administration says the new taxes will apply to products ranging from hockey sticks to wine and cement. The list is long. According to documents released by the White House, other goods subject to the tax include honey, seeds and agricultural products, as well as certain cosmetics, perfumes, clothing, jewelry, furniture, cameras, fabrics and more.

The 50% levy also applies to some products that were previously protected under the United States-Mexico-Canada Agreement (USMCA), a trade deal dating back to Trump's first term. That marks a shift from previous tariffs and further underscores questions about the agreement's future overall.

How is Trump imposing these tariffs? To impose these tariffs, Trump turned to a long-dormant Depression-era law: Section 338 of the Tariff Act of 1930.

At a time when the U.S. and world economies were collapsing nearly a century ago, Congress passed the 1930 law as part of broader legislation known as "Smoot-Hawley" — named after those who sponsored it in Congress. But Section 338 — which authorizes the president to impose import duties of up to 50% on imports from countries that have discriminated against U.S. companies — had never been used specifically to raise tariffs, until now.

No investigation is required to justify the tariffs. Nor is there any limit on how long they can remain in effect. However, because there is no precedent, the most recent levies could also face greater legal challenges.

Trump argued that Canada was unfairly discriminating against automotive, alcohol, and dairy exports from the United States. The president expressed his anger over Ottawa's retaliation against his own tariffs in 2025, and noted that Canadian imports of American alcohol and cars began to decline last spring.

Is Canada retaliating? On Saturday, Carney quickly pledged to match the new levies "dollar for dollar," and later announced that retaliation would begin on September 8. He indicated that Canada's tariff increases would target steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics exported by its southern neighbor.

Meanwhile, provincial leaders such as Ford have reiterated Canadians' willingness to endure economic pain rather than yield to pressure from Washington.

Trump "underestimates Canada. We are totally committed," Ford declared on Monday. In addition to potentially cutting off supplies of electricity and critical minerals from Ontario, he also called on the government to consider using oil and potash as leverage.

Meanwhile, Trump launched new threats on social media. He threatened to raise tariffs on Canadian cars, trucks, auto parts, and steel to 50% starting January 1, 2027. Like other countries, Canada currently faces a broader 25% tariff on automobiles. A sectoral tariff of 50% on most steel imports is already in effect.

"We don't need Canada, they need us!" Trump wrote on Monday.

Carney said that same day that Washington's proposals for the automotive sector would "gradually dismantle" Canadian production. He also questioned what Trump's latest move would mean for workers in U.S. states that depend on demand from Canada.

The prime minister added that Ottawa remained willing to negotiate, but only if the White House approached the talks as a partnership between sovereign nations. He said that "an attitude at the negotiating table that Canada is a subsidiary of the United States" is "something we will not accept."

What's next? Tariffs are taxes paid by importers, or companies that purchase goods from abroad. This is normally passed on to consumers through higher prices and, as has been seen over the past year, can also create uncertainty for workers in affected sectors.

"Almost every industry and profession is likely to see downstream effects from this growing trade dispute," Augustine Lo of the law firm Dorsey & Whitney, whose work includes advising clients on international trade, said on Saturday.

The 50% tariffs are in addition to previously imposed levies — including a 10% rate that Trump applied to Canada just last month, ostensibly for not doing enough to prevent imports produced with forced labor — as well as separate sectoral tariffs affecting trading partners around the world.

The growing trade war underscores Trump's willingness to risk breaking established alliances. And Ottawa's reluctance to accept a deal may reflect recent experiences.

Trump has repeatedly lashed out at Canada, even after episodes in which the country made concessions following his demands. Some tolls on the newly inaugurated Gordie Howe Bridge will be shared for 15 years, even though Canadians paid for the structure connecting Detroit and Windsor. Canada also withdrew a digital services tax last year. Meanwhile, Trump has threatened to impose more tariffs for various reasons, ranging from a television advertisement that criticized his trade policies (which was later pulled by the Ontario government) to the wildfires that darkened skies across North America.

The increase in tariffs has already contributed to higher inflation, but it appeared to stabilize to some extent in recent months, according to researchers at the Federal Reserve Bank of St. Louis, particularly after the Supreme Court struck down some of Trump's broader levies in February.

Even so, the weekend's escalation with Canada is the latest example of Trump invoking other laws to impose tariffs. And, more recently, Washington's war against Iran has pushed prices even higher. The cost of living is a central concern for many voters in a midterm election year, meaning the political repercussions could mount for the Republican president in the coming months.