After nearly two weeks of negotiations, US and Canadian trade talks fell apart minutes before a midnight deadline. That triggered 50% tariffs on approximately $20 billion worth of Canadian goods. The tariffs — covering plywood, lumber, dairy, alcohol, cement, and hockey gear — took effect at 12:01 AM ET on August 22 under Section 338 of the Tariff Act of 1930. No president had used that law for tariffs of this scale since the 1940s. President Donald Trump paused the original August 19 deadline three days earlier, posting on Truth Social that the US and Canada had "a DEAL!" Canadian Prime Minister Mark Carney asked provincial premiers to lift their bans on US alcohol sales. Most agreed. Ontario Premier Doug Ford refused until the US dropped the tariffs first. A final agreement never came. Both governments say the other walked away.

The White House: Canada Walked Away From a Done Deal

US Trade Representative Jamieson Greer says Canada made 11th-hour demands that wrecked an agreement both sides had nearly finalized.

Greer said Canada blew up a done deal. Canada made "new demands and walk backs of other commitments," he said, that "upended the careful balance reached in the past days."

The US put a substantial offer on the table. Greer listed supply chain coordination on aerospace, critical minerals cooperation, increased enforcement against forced-labor imports, and the formal opening of USMCA renegotiations. Greer called Canada's refusal to finalize a deliberate choice.

Trump's tariffs cite three Canadian practices. The Section 338 proclamations target provincial bans on US alcohol retail, a dairy quota rule that disadvantages American suppliers, and Canada's surtax on US-made vehicles.

Canada: The US Changed the Terms at the Last Minute

PM Mark Carney says Washington's last-minute changes were unfair and uneconomic, making any deal too unreliable to sign.

Carney quit the talks minutes before midnight. He said last-minute US changes were "unfair, uneconomic." He added that those changes raised questions about "the reliability of any potential deal." Canada is framing the collapse as a US breach of the negotiating framework, not a Canadian walkout.

Carney said Canada intends to match US tariffs. He pledged to hit back "dollar for dollar to protect our workers and businesses." Trade Minister Dominic LeBlanc was on the ground for the final round of negotiations. Carney has consistently said Canada is defending its sovereignty and workers, not backing down.

Carney couldn't deliver one of Trump's three demands. He asked provincial premiers to lift their bans on American alcohol — but Ontario Premier Doug Ford refused to act until the US removed the tariffs first. Ontario is Canada's largest province by population. Carney has no authority over provincial liquor policy — the premiers decide.

Economists and Businesses: The Tariffs Raise Prices for Ordinary People

50% tariffs on plywood, dairy, and lumber will hit US home builders, contractors, and consumers.

A 50% tariff doubles the cost of Canadian plywood. A British Columbia plywood manufacturer told Global News it cannot absorb that cost. The Forest Products Association of Canada said the tariffs hurt Canadian forestry workers during "an already challenging period" — and also hinder US efforts to improve housing affordability.

US distributors are already feeling the strain. JP Building Supply said home builders and contractors faced pressure to order before the tariff or wait for relief that may not come. J.P. Morgan economists said the tariffs "will weigh on hiring and investment decisions by directly impacted firms across North America."

The US and Canada trade $900 billion a year. That is the world's largest bilateral trading relationship, and the tariffs cover $20 billion of it. US and Canadian plants in automotive, lumber, and manufacturing share supply chains that neither side can quickly redirect. Economists have warned the disruption will spread well beyond the goods the tariffs cover.

Where This Lands

The 50% tariffs are in effect. Greer says Canada walked away from a deal that was essentially done; Carney says the US changed the terms too late and too many times for a deal to be reliable. What exactly Canada demanded at the 11th hour, and what exactly the US changed, remains disputed. Canada's "dollar for dollar" retaliation means American exporters now face new tariffs too. Higher prices on construction materials, dairy, and alcohol will reach US consumers regardless of which account of the breakdown is correct.

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