Last-minute talks broke down over Canadian demands for relief on steel, aluminum, auto and lumber tariffs; no new negotiations are planned, while the dispute clouds the future of the USMCA and North American tradeAP|The United States imposed 50% tariffs on some $20 billion worth of Canadian products early Saturday, prompting an immediate pledge of retaliation from Ottawa after last-minute negotiations failed to resolve the latest crisis between the longtime allies.The new import taxes affect roughly 5% of Canada’s annual exports to the United States and cover products ranging from hockey sticks to tongue depressors. Canadian Prime Minister Mark Carney said Canada would match the U.S. tariffs dollar for dollar, escalating a trade confrontation that is increasingly raising questions about the future of the U.S.-Mexico-Canada Agreement, the trade pact underpinning much of North American commerce.Canadian Prime Minister Mark Carney with US President Donald Trump in the Oval Office (Photo: Anna Moneymaker/Getty Images)Canada had sought relief from existing U.S. tariffs on steel, aluminum, automobiles and lumber, but Washington was unwilling to grant the concessions Ottawa wanted. U.S. Trade Representative Jamieson Greer blamed Canada for the collapse of negotiations, saying Ottawa introduced new demands and reversed previous commitments shortly before the deadline.“Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week,” Greer said in a statement read to reporters shortly before midnight. “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.”Carney rejected that account, saying the terms had shifted at the last minute. “Last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal,” he said, adding that his government would announce further support for Canadian workers and businesses in the coming days.Greer said the U.S. proposal had been “forward-looking” and offered what he described as “a historic economic and national security partnership.” No further negotiations have been scheduled. The breakdown represented a sharp reversal from just two days earlier, when officials from both countries had suggested a compromise was within reach.The economic consequences could be significant, but the political fallout may prove even deeper. The United States and Canada traded roughly $880 billion in goods and services last year, and the two countries have long maintained one of the world’s closest economic and security relationships.The tariffs had initially been scheduled to take effect Wednesday, but President Donald Trump extended the deadline by three days to allow negotiations to continue. Despite that reprieve, the two sides failed to bridge their differences.Washington and Ottawa have clashed repeatedly over trade issues for decades, particularly Canadian softwood lumber and U.S. access to Canada’s protected dairy market. Those disputes, however, rarely threatened the broader alliance. Canadian troops fought alongside U.S. forces in Afghanistan after the September 11 attacks, while the two countries share a 5,525-mile border crossed each day by hundreds of thousands of people and billions of dollars in trade.Trump’s approach has sharply departed from that traditionally cooperative relationship. As part of his broader effort to shift manufacturing back to the United States, he has repeatedly imposed tariffs on Canadian goods and has also angered Canadians by suggesting that the country could become the 51st U.S. state.Public frustration in Canada has grown accordingly. A petition seeking the expulsion of U.S. Ambassador Pete Hoekstra, a Trump ally, has collected nearly 248,000 signatures since July 21. Its organizers accuse him, among other things, of helping normalize Trump’s rhetoric about annexing Canada.Both countries nevertheless have powerful incentives to avoid a prolonged trade war. Nearly 72% of Canadian goods exports went to the United States last year, making the U.S. market critical to the Canadian economy. For Washington, new tariffs could also prove politically costly because they are paid by U.S. importers, who can pass the added expense on to consumers already frustrated by the cost of living ahead of November’s midterm elections.“Canada likely wanted further sector-specific relief than the U.S. was willing to offer, or Canada’s concessions did not go far enough,” said Ryan Majerus, a partner at King & Spalding and former U.S. trade official. “Either way, I think both sides will be under immense pressure in the coming days to still find an off-ramp. But if Canada has agreed to also impose tariffs, the off-ramp may be even harder to find.”Candace Laing, president and CEO of the Canadian Chamber of Commerce, called the new tariffs “a body blow to North American competitiveness,” warning that they would raise costs for Americans while threatening Canadian customers, investment and small businesses.The dispute is also unfolding as Washington, Ottawa and Mexico prepare for negotiations over the future of the USMCA, the agreement Trump negotiated during his first term and once hailed as a major achievement. The United States has already begun formal talks with Mexico on revising the pact, but negotiations with Canada have yet to begin.Barry Appleton, senior fellow at the Center for International Law at New York Law School, said both sides had now made public commitments that would make de-escalation more difficult.“Canada told the Americans in advance that if these tariffs landed, it would stop negotiating and retaliate,” he said. “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.”