'They asked too much': Canadian dollar slides as Ottawa and Washington head for all-out trade war

Canadian Dollar Declines After U.S.-Canada Trade Negotiations End Without Agreement

The Canadian dollar fell against the U.S. dollar on Monday morning after trade talks between Ottawa and Washington ended without a deal. The U.S. imposed 50 percent tariffs on approximately $20 billion of Canadian imports the previous Saturday, and Canadian Prime Minister Mark Carney announced matching retaliatory measures to begin September 8.

The new U.S. duties cover dairy products, wine, wood products, furniture, cement, ceramics and additional categories. They add to earlier tariffs applied since April 2025 on autos, steel, aluminum and forestry products. Carney stated that Canada would impose equivalent tariffs on U.S. steel, dairy, agricultural equipment, paper and electronics, with specific lists to be published in the coming days.

At 7:30 a.m. ET the Canadian dollar traded 0.55 percent lower against the U.S. dollar and also declined against the euro, British pound and Japanese yen. Analysts at ING noted that Canada’s smaller, more open economy faces greater exposure, though Carney has indicated possible additional fiscal support for affected sectors. Bradley Saunders, North America economist at Capital Economics, said the 50 percent rate could severely affect exposed industries because the duties apply without the USMCA production exemptions used in prior rounds.

Saunders estimated that the targeted goods represent about 0.6 percent of Canadian GDP but that a sharp drop in exports could reduce already weak GDP growth toward zero. Further effects could occur if reduced U.S. demand for finished goods such as furniture and electrical equipment reduces orders for upstream Canadian primary industries already subject to Section 232 tariffs. He added that an extension of the 50 percent rate to 20 percent of Canada’s U.S. goods exports, from the current 5 percent, could reduce Canadian GDP by roughly 2 percent and increase the risk of recession.

Negotiators had worked through the week toward an agreement, but both governments later attributed the breakdown to the other side’s positions on tariff levels and trade rules. The United States maintains a $48.3 billion goods trade deficit with Canada, driven largely by imports of natural gas, electricity and crude oil. Canadian officials have argued that including services narrows or reverses the overall balance.

In a Truth Social post, President Donald Trump stated that Canada “wants the benefits of being a State, without being one” and has long imposed high tariffs on U.S. agricultural products. Carney said the United States “asked too much and offered too little” and that Canada would not compromise sovereignty or key industries. Points of disagreement included tariff treatment for autos, steel and aluminum, Canadian language protections for French, and Ottawa’s ability to conclude separate trade agreements.

When asked about entering a trade conflict, Carney replied that Canada had been “attacked.” Public polling cited in Canadian media indicates majority support for a firm negotiating stance, though concern over employment has risen. Economist Trevor Tombe has projected that sustained 50 percent U.S. tariffs could eliminate around 90,000 Canadian jobs. Carney was elected in March 2025 partly on a platform of resistance to U.S. tariff measures. Reports of U.S. alcohol being removed from some Canadian retail shelves have accompanied the deterioration in relations.

Conservative opposition leader Pierre Poilievre stated that Canada cannot accept tariffs that would deindustrialize domestic industry. Both countries exchange tens of billions of dollars in agricultural goods annually, and their automotive supply chains are integrated. The USMCA remains under renegotiation.