US, Canada fail to reach a tariff deal, deepen trade war

The United States and Canada have failed to reach a trade deal late on Friday, and the US said it would impose 50 per cent tariffs on some imports from Canada, an escalation of tensions between the two long-time allies.

A senior Trump administration official said Section 338 tariffs on about $20 billion worth of Canadian goods would go into effect just after midnight on Saturday.

Canada's Prime Minister Mark Carney said he had suspended trade negotiations and Canada would retaliate dollar for dollar on the new tariffs.

The decision by the US administration followed three days of talks in Washington between Canada's minister for trade with the US, Dominic LeBlanc, and US Trade Representative Jamieson Greer.

"I have decided to suspend trade negotiations with the US and have directed Canada’s negotiators to return to Ottawa," Carney said in a statement.

"They (negotiators) have worked hard, in good faith, to defend the interests of Canadians throughout these negotiations up until the very last minute," he said. "However, last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal."

While the new measures affect a relatively small share of Canadian exports, they add to existing US tariffs on steel, lumber and autos. The new tariffs could thwart Canada's fragile economic recovery and impact how the two neighbors engage in the coming months on broader negotiations for a free-trade pact.

They apply regardless of whether Canadian goods qualify for preferential treatment under the US-Mexico-Canada trade agreement, which has shielded much of Canadian industry from earlier US tariffs.