By Reuters

Posted on 21 Jul 2026.

The trade dispute is unfolding against a backdrop of heightened tensions between the two neighboring countries.

Canadian Prime Minister Mark Carney said he and United States President Donald Trump have agreed to intensify trade negotiations, but warned he would consider all options if the tariffs Trump threatened on Monday go ahead.

Carney made his remarks to journalists on Tuesday after he and Trump spoke.

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Trump on Monday unveiled plans for 50 percent tariffs on a wide range of imports from Canada in retaliation for what he described as discriminatory treatment of US-made cars, alcohol and dairy goods.

Ties between Canada and its top trade partner have been strained by Trump's repeated suggestions of making Canada the 51st state, disputes over a new bridge, and pointed remarks about wildfire smoke.

The tariffs came just before US and Mexican trade negotiators met for a third round of bilateral talks, without Canada.

“I’ve spoken with the president; we agree to intensify discussions. We’ll begin that right away, and this is part of the negotiation. So the first objective is to get a comprehensive agreement,” Carney told reporters.

Trump, when asked whether Canada tariffs were in response to the wildfires, said: “No, that’s separate. We’re looking at that separately.”

Carney stated that Canadian provinces should only lift their bans on US alcohol as part of a comprehensive trade agreement with the United States.

Until then, Canada was the largest importer of US alcohol, at least by volume, and the ban reduced Canadian imports of US wine by more than 80 percent since February 2025, and other alcohol by a similar amount, Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, said in a note.

Leaders of Canada’s provinces meeting this week in Prince Edward Island blasted the new tariffs.

Ontario Premier Doug Ford, leader of Canada’s most populous province, said Canada should respond “dollar for dollar” to the new tariffs, while Alberta Premier Danielle Smith said the new tariffs would hurt both Canadian and American workers.

Saskatchewan Premier Scott Moe called for the government to intensify talks with the US, saying the relationship with Canada’s largest trading partner “is more important than any president or prime minister.”

British Columbia Premier David Eby delivered the starkest message: “There is not a chance in hell that US alcohol is going back on the shelves in British Columbia.”

Saskatchewan leader Moe said he expected the federal government would be asking provincial leaders to consider restocking their shelves with US alcohol as negotiations continue, however.

‘Canadians are not a punching bag’

Even the opposition Conservatives called on the prime minister to stand firm against Trump.

“President Trump’s latest tariffs are another unacceptable and unjustified attack on Canadian workers and our businesses,” the party said in a statement. “Canadians are not a punching bag,” it said, adding that the tariffs must be withdrawn immediately.

In slapping import taxes on symbolic goods ranging from ‌wine to cement and ice hockey gear, Trump invoked Section 338 of the US Tariff Act of 1930, which permits a president to impose punitive tariffs of up to 50 percent against trading partners deemed to have discriminated against US goods. That marked the law’s first known usage in nearly a century of existence.

The new tariffs, set to take effect in 30 days, would also apply to dairy products, swimming pools, furniture, fishing rods, seeds, clothing and wigs, among other items.

The US Trade Representative’s office said that the tariffs would apply to nearly $20bn of imports from Canada. That’s about 5.2 percent of the $382bn worth of goods that the US imported from Canada in 2025, according to US Census Bureau data.

US Vermont Senator Peter Welch, a member of the US Senate Finance Committee, called the new tariffs “an extreme escalation of President Trump’s reckless and irresponsible trade war”. Welch said the White House’s attacks on Canada have caused “undeniable harm” to Vermont and called for the US to drop the new threats immediately.

Candace Laing, president and CEO, Canadian Chamber of Commerce, said the group had previously shared its concerns with the Canadian government and worried that more tariffs could be coming.

“We knew this would get bumpier before landing,” she said.

The Canadian dollar weakened 0.1 percent to touch a one-week low at 1.4090 per US dollar, or 70.97 US cents.

The outcome of these intensified negotiations could determine the future of bilateral trade ties. Observers are watching to see whether a comprehensive deal can be reached before the tariff deadline. The standoff also underscores the fragile state of US-Canada relations under President Trump's trade policies.