ReutersThe United States and Canada have entered into uncharted territory.
The longtime allies and economic partners, who have enjoyed free trade for decades, are now in an escalating trade war with no clear off ramp.
And for Prime Minister Mark Carney, the late night decision to suspend talks with President Donald Trump and to retaliate instead of agreeing to a deal that seemed in reach, will be a significant political test.
He is one of the first world leaders to walk away from the negotiating table with the White House – and the outcome will be closely watched.
Carney’s decision will challenge the appetite among Canadians to accept some economic pain as Ottawa pushes for more US concessions.
After rejecting Trump’s high pressure tactics, and in choosing to hit back against the latest duties, Carney will need to convince Canadians that the economic pain is worth the cost of standing up to the Trump administration in search of a better agreement in the long run.
In remarks on Saturday, he said “we take this step confident this is in the best interest of Canada” and accused the US of a “power play” by seeking eleventh-hour changes.
Asked by a reporter whether the US and Canada were locked in a trade war, he replied: “You’re at war when you’re attacked – we were attacked.”
Switching to French, he said the spiralling trade dispute “wasn’t our choice”, adding: “Canada is strong, Canada is ready, Canada is united.”
There is no doubt this will cause pain on both sides of the border, with business facing more pressure from US duties and Canadian counter-tariffs.
Canada sends about 70% of its exports to the US, and the country is the top trading partner for a number of US states, with Michigan, Kentucky, Indiana and Ohio among the most exposed.
Carney came to power with a call for “elbows up” – an ice-hockey term for an aggressive approach – vowing to fight for Canada in the face of a Trump administration keen to exert economic pressure for its America First agenda.
Many Canadians have told pollsters that they are willing to fight.
A recent survey by Abacus Data suggested that around 36% of Canadians would support retaliating to US tariffs, while a Leger poll indicated that 56% of Canadians want the federal government to take a hard line and make no more concessions.
Canadians frustrated with the US tariffs have already chosen to avoid travelling there. The boycott has meant a loss of about C$3.3bn ($2.35bn; £1.75bn) in travel revenue for the US last year.
A decision by most provinces to remove US alcohol from store shelves has hammered that sector.
Based on US government trade data, US wine exports to Canada fell 78% year over year, a $357m loss in export value. The US distillers association reported similar numbers – saying provincial bans have caused exports of American spirits to drop by more than 70%.
The ban quickly became a point of frustration for the Trump administration.
Canada’s prime minister will also need to convince the provinces who have been less affected by the US trade dispute so far that walking away is a risk worth taking.
He will be meeting them on Saturday to brief them on the current state of affairs.
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What went wrong?
For a week, it seemed that a deal between Washington and Ottawa was in reach.
It’s still unclear exactly how the talks fell apart in the final hours.
Carney said that late US proposed terms “were unfair, uneconomic, and called into question the reliability of any deal”.
He said on Saturday those terms included demands on the automobile sector and “unacceptable” restrictions on trade deals with other countries.
In one biting line, he said of the Trump administration: “We recognise sometimes its signature is written in pencil”.
US trade representative Jamieson Greer, meanwhile, pointed to “new demands and walk backs of other commitments by Canada”.
In a statement on Friday, the Distilled Spirits Council of the United States suggested “Canadian provinces’ continued refusal to return US spirits products to store shelves has led to this outcome”.
Both Ontario and Quebec had yet to say whether they were on board with a reversal on the US booze boycott.
There were also reports by Canadian media that US Commerce Secretary Howard Lutnick, was unhappy with the deal. The BBC has contacted his office for comment.
And as details on an interim trade agreement with the US trickled out over last week, some provincial leaders, industry groups and political opponents raised concerns that the prime minister had not delivered on the fight he promised.
Conservative opposition leader Pierre Poilievre said that any agreement that included “one-sided” tariffs on Canadian industry would be “a bad deal”.
On Saturday, he backed Carney’s decision to walk away for now, saying: “Canada cannot accept one-sided tariffs that will deindustrialise our country.”
Doug Ford, the premier of Ontario and usually one of the most vocal Canadian politicians on US tariffs, had been silent on the tentative deal. But in a letter sent to Carney this week, Ford raised concerns that an agreement under pressure from the US would “embolden the United States to seek concession after concession”.
The province, which has a large manufacturing and vehicle sector, has been among the hardest hit regions in this trade dispute.
After negotiations broke down, Ford said “the prime minister has my full support for a strong response – tariff for tariff, dollar for dollar”.
The collapse of this agreement calls into questions the future of such talks, including an ongoing review of the US-Mexico-Canada free trade pact.
Now Carney – and Canada – must wait to see how Trump responds.
