It’s official: the US and Canada are in a trade war, a remarkable rupture in one of the world’s closest alliances. After Canada withdrew from talks last Friday, the US applied a 50% tariff on roughly $20 billion worth of Canadian goods, including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment. In response, Canadian Prime Minister Mark Carney said today that Canada will retaliate with its own tariffs, as high as 50%, on $20 billion in American imports starting next month. US President Donald Trump, meanwhile, has plans for 50% tariffs on Canadian automobiles, trucks and auto parts starting January 1.
The war of words has escalated too, with Carney accusing the US of signing deals “in pencil,” suggesting its commitments can’t be trusted, while Trump said Canada wants the benefits of being a US state “without being one.” Ontario Premier Doug Ford, whose province is heavily dependent on the auto sector, said Trump could “kiss my ass.” Trump later called Ford a “flunky,” and Ford called him a “loser.”
North of the border, the Canadian public is largely elbows up with Carney: 76% agree with his decision to break off negotiations. But regional divisions threaten to surface as the country prepares for fall elections in Quebec and a referendum on secession in Alberta. South of the border, the bitter standoff is worrying American lawmakers, who fear new tariffs will raise costs for businesses and households ahead of the midterms dominated by concerns about affordability.
Autos, imports, and the US midterms. One reason Canada said it backed out of talks was Washington’s insistence on excluding medium- and heavy-duty trucks from proposed tariff reductions. That includes some of America’s best-selling models, the Ford F-Series and Chevy Silverado, which are built at plants in Ontario. Autos are a major part of the province’s economy, making up 18% of its export earnings.
But the cost of the auto fight could cut both ways. Trump’s threatened 50% auto tariffs could have a particularly significant impact on Michigan, a state facing a nail-biter Senate race that could determine which party controls the chamber. Canada is also Michigan’s largest export market; the state exported $24 billion in goods to Canada in 2024, including nearly $14 billion in vehicles and vehicle parts. It also imported roughly $40 billion in goods from Canada, chiefly from Ontario.
Michigan Democratic Senate candidate Abdul El-Sayed, who narrowly leads in polls, slammed Trump for the breakdown in talks, which he says will mean a higher cost of living, and said that his opponent, former Republican Rep. Mike Rogers, would be a “rubber stamp” for Trump, citing Rogers’ defense of the president’s trade strategy.
The implications extend even beyond Michigan. Canada is the top customer for 26 US states, including Maine, Iowa, and Wisconsin, all of which have crucial races in November. Canada’s retaliation could also stoke inflation at the same moment when the Iran war’s energy shock is putting pressure on prices – which could hurt Republicans in key races across the country.
In Canada, there’s the Quebec factor. The most politically explosive issue north of the border is French language and culture. The US pushed Canada to scrap requirements that American streaming companies fund Canadian programming, a policy that helps support French-language productions in the French-speaking province of Quebec. Washington also sought an end to rules requiring bilingual French-English product labels and instruction manuals, which US companies have long complained raised their production costs.
Protection of French has shaped Quebec’s politics for generations. Threats to the French language contributed to the rise of Quebec nationalism since the 1960s and fueled the establishment of a separatist political party, the Parti Québécois (PQ). It’s also a live issue for Carney: Canada holds three federal byelections on August 31, including one in the Quebec riding of Chicoutimi–Le Fjord, while Quebec holds a provincial election this fall. Polls show the PQ on track to form the next government there.
For Carney, conceding French-language protections would be politically toxic – and Washington likely knows it. US Trade Representative Jamieson Greer alluded to this on Monday, insisting that the US gave Canada a good deal but that the government walked away “perhaps for political reasons,” noting the upcoming byelections.
But by citing the French language as one of the reasons for ending negotiations, Ottawa risks reopening old wounds within Canada. Alberta has long resented what some in the province see as Ottawa’s “favored” treatment of Quebec. Grievances include the federal equalization program, which sees federal taxes from wealthier provinces such as Alberta redistributed to poorer provinces like Quebec to fund social services, and pro-environment policies promoted by Quebec that hampered oil and gas development in Alberta.
Those tensions are particularly relevant now. On October 19, Alberta will hold a vote asking whether the province should remain in Canada or hold a binding referendum on separation in the future. By pressing Ottawa on an issue virtually guaranteed to be rejected, Washington could end up increasing anti-Ottawa sentiment in Alberta.
Where do things go from here? For now, negotiations are off: Carney told reporters on Monday that Canada will come to the table when the US “has the right attitude.” Trump, for his part, says he’s considering renaming Lake Ontario to “Lake America”. In the short term, that means more pain for both sides.
For the US, Canada’s retaliatory tariffs will target American products and hit their wallets ahead of the midterms. For Canada, Carney’s concern may be whether the trade dispute undermines Canadian unity, not just its economy. The question is whether public support holds as pain sets in – and whether regional grievances begin to resurface.
In his latest Quick Take, Ian Bremmer also examines the collapse of the US-Canada trade talks and what they reveal about Trump’s political vulnerability. As other countries look beyond Trump’s current term, Ian argues that Canada’s stance could foreshadow a broader shift in how allies respond to US pressure. Watch the video here.
