The trade war between the United States and Canada escalated overnight. Just a few hours after Canadian customs duties on American goods worth approximately $20 billion came into effect, the Donald Trump administration announced the ban on several imports from Canada and new restrictions on American public contracts.
The bans announced by Washington target most alcoholic beverages, certain dairy products, as well as motorcycles and mopeds manufactured in Canada. The measures will take effect on September 29, according to Reuters.
It is the latest round of reprisals in a dispute that affects one of the closest trading relationships in the world and raises questions about the future of the trade agreement between the US, Canada, and Mexico.
Canada Taxes American Goods Worth $20 Billion
Canada introduced on Tuesday customs duties ranging from 15% to 50% on American imports worth 27.6 billion Canadian dollars, equivalent to about 20 billion US dollars.
According to Associated Press, the list includes hundreds of products, including steel, aluminum, appliances, furniture, clothing, dairy products, cosmetics, electronics, and agricultural equipment.
Ottawa presented the measures as a "dollar-for-dollar" response to the 50% tariffs imposed by the Trump administration starting from August 22 on similar-value Canadian products.
Prime Minister Mark Carney acknowledged that the reprisals will lead to higher prices for some products and will limit options for Canadian consumers, but he said they are necessary to protect companies and workers in his country.
"We cannot allow American goods to enter Canada duty-free while our companies are taxed to export to the United States," Carney said.
The Canadian government has also prepared a $7.5 billion Canadian support package for workers and companies affected by the trade conflict.
Trump Bans Canadian Alcohol, Some Dairy, and Motorcycles
Washington's response came on the same day. The United States will ban, starting September 29, the import of most Canadian alcoholic beverages, including beer, wine, whiskey, rum, vodka, vermouth, and cognac.
Also banned will be certain dairy products or derivatives, including whey proteins, as well as some types of molasses, motorcycles, and mopeds.
Several cheese varieties will not be completely banned but will be added to the list of Canadian products subject to a 50% tax. The list of goods subject to additional taxes will also be expanded to include paper, aluminum, wood, furniture, and lighting fixtures.
The Trump administration claims that the measures are a response to the discriminatory treatment applied by Canadian authorities to American products and companies.
Canadian Products Eliminated from Public Contracts
Donald Trump also called for the elimination of Canadian products from the American federal program "Multiple Award Schedules," through which public institutions purchase goods and services from selected suppliers based on multi-year contracts.
The American president stated that the restriction will remain in place until Canada restores what he called "full and fair reciprocity" for farmers and companies from the US.
The targeted American program can generate contracts of over $50 billion annually. The restrictions could also affect Canadian exports that were not previously subject to additional taxes.
The Ottawa government has not yet responded to this announcement.
Bombardier Threatened with Exclusion from the American Market
A day earlier, Trump also threatened to prevent the Canadian manufacturer Bombardier from selling its planes in the United States unless it moves its production to that country, as reported by The Guardian.
The company responded that it already has around 3,500 employees in the US, operations in over 20 states, and a network of about 2,800 American suppliers.
Bombardier annually purchases goods and services worth over $2.5 billion from companies in the United States.
Separately, Trump threatened to increase, starting January 1, the tariffs on Canadian automobiles, trucks, and auto parts from 25% to 50%.
Canada Tries to Reduce Its Dependence on the US
Official trade negotiations have been suspended since August 21 after several rounds of talks failed. Officials from both countries continue to communicate, but the formal resumption of negotiations has not been announced yet.
Carney stated that the demands made by Washington would make Canada even more dependent on the United States and would weaken important industries such as the auto industry, steelmaking, and the forestry sector.
"This change will have a cost. Action always has a cost. But it doesn't compare to the cost of inaction," said the Canadian prime minister in a video message.
Approximately 68% of Canada's exports this year went to the United States, but about 80% of these benefited from exemptions under the North American trade agreement.
Ottawa is now trying to diversify its trade and double its exports to other markets over the next decade. Carney is set to travel to Strasbourg next week amid discussions on deepening Canada's economic relations with the European Union.