The Canadian dollar is absorbing the first visible pressure from the renewed trade fight with the United States after President Donald Trump opened yet another economic spat with Washington’s northern neighbor.

At press time, the loonie was down 0.58% against the U.S. dollar. It also lost ground against the euro, the British pound and the Japanese yen.

As Cryptopolitan reported, Washington imposed a 50% tariff on about $20 billion of Canadian goods on Saturday. The stakes reach far beyond a few narrow industries, because Canada is America’s second-largest trading partner after Mexico, making the dispute relevant not only for policymakers but also for exporters, manufacturers and cross-border supply chains on both sides of the border.

Ottawa readies a September 8 response

Prime Minister Mark Carney has already promised that he will introduce his own tariffs on September 8. As previously reported, Carney said Ottawa would retaliate “dollar for dollar” and release the complete list “in the coming days.” The government has also suggested that fiscal support could be used to help businesses hit by the conflict.

Carney has been clear about the cost, though. The new duties, he said, would “raise costs and reduce choice for Canadians.”

Political backing at home, but growing job worries

The political reaction inside Canada has been more supportive than the economic numbers might suggest. Recent polling shows a majority of Canadians back taking a tougher position against Washington. At the same time, more people are becoming worried about their jobs. Canadian economist Trevor Tombe estimates that keeping U.S. tariffs at 50% could lead to roughly 90,000 job losses.

Washington says Canada pushed for more after negotiators nearly reached a trade deal

Negotiators from both countries spent the week trying to prevent the tariff increase. By the weekend, the talks had broken down and the language from both governments had become much sharper. Washington and Ottawa each blamed the other side for the failure and accused the other of maintaining unfair trade practices.

U.S. Trade Representative Jamieson Greer said Monday that both sides had been close to an agreement before things changed near the end. “The Canadians ‘wanted more’ than Washington was willing to offer,” Greer said.

“We offered them the best access to the United States of any country in the world. Obviously, there’s always going to be tariffs, and there’s going to be that protection for American workers and companies,” he said.

Greer said the U.S. proposal included major cuts to several duties that matter to Canada.

“But we sought to accommodate the Canadians by … cutting tariffs in half on steel, on aluminum, and extensively reducing them on autos, and even on things like softwood lumber, accommodating some element of that. Things that are sensitive for the Canadians. They simply … wanted more. I don’t know if it was political for them. It certainly doesn’t make economic sense,” he said.

He played down the size of the new measures from the American side, saying markets “understand that this affects a very small amount of trade.” The Canadian products covered by the latest tariffs equal about 0.6% of total U.S. goods imports. The United States currently runs a $48.3 billion goods trade deficit with Canada, according to the U.S. Treasury website.

Trump threatens 50% auto and steel tariffs as Canada prepares its September response

Trump took a much harder tone in a post on Truth Social, accusing Canada of taking advantage of the United States and focusing heavily on agricultural trade.

“Canada has been ripping off the United States of America for years. Their ridiculously high tariffs on our Farmers and farm products has made life impossible for these great American Patriots, and has long created a 60 Billion Dollar Deficit between our two Countries. Not sustainable, and NOT ANYMORE!” he wrote.

Trump also announced another possible escalation beginning next year. He said tariffs on Canadian cars, trucks, automotive parts and steel will rise to 50% on January 1, 2027.

“Build in the U.S. and there are ZERO TARIFFS,” Trump wrote.

He then said Canada would no longer receive the kind of treatment Washington had previously extended to it.

“Canada will be treated like a State no longer! On Trade, and in other ways, also, they are among the worst Nations in the World to deal with. They feel entitled, and yet, WE DON’T NEED CANADA, THEY NEED US! They do 95% of their business with the U.S., with us, the exact opposite!” he wrote.