U.S. imposes 50% tariffs on $20B worth of Canadian products, and Canada says it will retaliate

The United States imposed 50% tariffs on $20 billion worth of Canadian products early Saturday, and Canada immediately said it would retaliate, after last-ditch negotiations failed to resolve the latest strain in already tense relations between the historic allies.

President Trump's import taxes will hit about 5% of what Canada ships to the United States every year, including products ranging from hockey sticks to tongue depressors.

"Canada will match those tariffs dollar for dollar to protect our workers and businesses," Canadian Prime Minister Mark Carney said in a statement. The retaliation escalates the trade conflict and calls into question the future of a North American trade pact between the United States, Canada and Mexico that is crucial to industry in all three countries.

Canada sought concessions on Trump tariffs on steel, aluminum, autos and lumber that the United States was unwilling to provide, a senior Trump administration official told reporters.

"Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days," U.S. Trade Representative Jamieson Greer said in a statement read to reporters on a press call shortly before midnight.

Carney blamed Washington for the breakdown, saying "last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal." He said he had suspended negotiations and directed Canada's negotiating team to return to Ottawa.

Carney said his government would announce additional support for Canadian workers and businesses in the coming days.

Greer said the U.S. offer was "forward-looking" and included "a historic economic and national security partnership."

No further talks have been planned. The breakdown in negotiations marked a sharp reversal from two days earlier, when officials from the two countries sounded as if they were headed toward a compromise.

Carney said Canada's goal throughout the negotiations had been to secure the best possible agreement, "never a deal at any price or on any deadline."

The political impact will likely be even bigger than the economic fallout. The countries sold each other $880 billion worth of goods and services last year.

The tariffs were initially supposed to kick in at 12:01 a.m. Wednesday. But Trump extended the deadline for three days to allow talks to continue, but the two countries still could not reach an agreement in time.

Trump has hit Canadian goods with tariffs - in a push to bring manufacturing back to the United States - and has repeatedly made inflammatory comments about turning Canada into America's 51st state.

Carney said Canada had recognized that "America has changed" and that the two countries would "not return to our old relationship."

Nearly 72% of Canada's goods exports last year went to the United States.

To hit Canada, he reached back to the Great Depression, invoking Section 338 of the Tariff Act of 1930 to threaten 50% tariffs on products that account for about 5% of Canadian exports to the United States.

Section 338, which has never been used before to impose tariffs, authorizes the president to slap import taxes of up to 50% on imports from countries that have discriminated against U.S. businesses. No investigation is required to justify the levies. Nor is there any limit on how long they can stay in place.

"Canada told the Americans in advance that if these tariffs landed, it would stop negotiating and retaliate,'' said Barry Appleton, senior fellow at the Center for International Law at New York Law School. ''The American trade representative said publicly he would not tolerate retaliation. Both sides have now committed themselves in public, which is how escalation stops being a choice.''

Candace Laing, president and CEO of the Canadian Chamber of Commerce, called the tariffs "a body blow to North American competitiveness," warning they would raise costs for Americans while threatening Canadian customers, investment and small businesses.