Carney has the cards: public opinion firmly behind him in trade showdown with Trump

The breakdown in trade talks between the U.S. and Canada on 21 August surprised many. In the days before the Canadian walkout, there was some optimism that progress was being made. On 18 August President Trump, ever anxious to get in front of the news, announced that a tentative understanding had been reached and indicated that he was prepared to push back on the 22 August deadline for tariff increases.

The talks in Washington, which opened in July, were very significant. They aimed to settle the trade war triggered by Trump’s 2025 decision to impose a range of “reciprocal tariffs” on Canadian exports to the U.S., and by Canada’s retaliatory tariffs and other measures hitting U.S. exports. It was also hoped that the talks might help establish a framework for the upcoming review of the United States-Mexico-Canada Agreement (USMCA).

When the talks broke down, U.S. Trade Representative Jamieson Greer sought to blame Canada, suggesting the Canadian negotiating team had either introduced new demands or backed away from previously discussed commitments. This was rejected by the Canadian side. The Canadian Prime Minister Mark Carney at a press conference on 22 August suggested that it was the United States that made last-minute demands which Canada considered unacceptable, including efforts to introduce provisions that would impact on Canada’s trade autonomy and sovereignty.

Following the breakdown, U.S. tariffs of 50% on roughly US$20 billion of Canadian goods came into effect. The tariffs are imposed under Section 338 of the US Tariff Act of 1930, which allows the U.S. president to impose duties of up to 50% on imports from a country deemed to be discriminating against the U.S.

Prime Minister Mark Carney has indicated that his Government will respond with retaliatory tariffs hitting U.S. exports to Canada on a “dollar for dollar” basis. Canada’s retaliatory measures will take effect immediately after Labour Day 7th September – the day when the starting gun for U.S. mid-term elections to get into full swing is ‘fired’ – a point that will not be missed by Mr. Trump.

Prime Minister Carney’s speech at Saturday’s press conference went much further than laying blame for the collapse of the talks in Washington. He not only explained to Canadians why his government was walking away from the talks but also looked beyond the current dispute.

Saying “America has changed’ , Mr Carney made it clear that going forward relations between the U.S. and Canada would be very different, a change that would come at some cost to the U.S.

“You’re at war when you get attacked – we got attacked”

Carney’s speech on Saturday was not just a rallying call for the citizens of Canada; it also carried a series of messages for Washington. Canada he said had ‘had it’ with dictates from DC. He portrayed the actions of the U.S. as breaching expectations as to how long established allies and neighbours should behave.

While Carney’s speech was delivered in his usual calm and deliberative manner, it contained some distinctly Churchillian elements. When asked whether Canada was in a trade war Carney was clear –“you’re at war when you get attacked – we got attacked”. The US he suggested was not just trying to drive a hard bargain in the trade talks it had abused its economic power in ways that departed from the cooperative norms that had underpinned the Canada–U.S. relationship for decades. As a result, Canada’s relations with Washington had changed. While Canada could not “control the storm that blows in from Washington we can however chart a new course by building Canada strong at home and diversifying our trading relationships abroad.”

In the trade talks, Canada, he said, had “worked intensively and in good faith with the United States to negotiate a new comprehensive trade deal”. Canada had been “pragmatic patient and persistent” in pursuing every opportunity to reach an agreement but “had been under no illusions: we recognized from the start that America has changed.”

He reminded the press conference that in 2025 he had signalled that the decades-long process of steadily increasing integration between the Canadian and the U.S. economies was over. Canada, he suggested, had recognized – before other governments – that America was ready to use commercial relationships, tariffs and economic integration as a weapon – even against closest its allies.

In a particularly scathing reference to a lack of trustworthiness on the part of the U.S., Carney suggested that Canada had come to recognize that the US signature on agreements was sometimes “written in pencil” – basically worthless.

Going into the trade negotiations, Prime Minister Carney and the Canadian negotiating team had been given “a new mandate to seek a fair deal negotiated in good faith”. Recognising that “the bonds between Canadians and Americans are long and they remain strong,” Canada had hoped for a mutually beneficial trade agreement “that respects our sovereignty, one that builds on our complementary strengths, one that lowers costs for families on both sides of the border (and) one that creates good jobs for workers”. Such an agreement was possible. Canada had worked towards that goal. It consistently proposed long term partnerships while America, in contrast, often pursued short term transactions. In the end, Mr. Carney said, “the gap between partnership and competitor has remained too wide in recent days” – as a result, the Canadian negotiators were instructed to return to Ottawa.

Carney was particularly caustic about the changing U.S. explanations for the volatility it demonstrated on tariffs. The U.S., he suggested, not only violated its commitments under the Canada–US–Mexico Agreement (CUSMA) by arbitrarily introducing tariffs but had also continuously changed the rationale for its actions, ranging from “fentanyl, to taxes on US tech giants, to certification of U.S. aircraft, to the sharing of tolls of a bridge that Canada built and paid for, to our dairy policy, to provincial decisions not to sell American alcohol during the trade war, to a television advertisement that quoted Ronald Reagan, and to smoke from wildfires while they threatened our communities.”

Prime Minister Carney also directly challenged President Trump’s much-favoured argument that U.S. tariffs on Canadian exports to the U.S. could be justified on the basis that the U.S. runs a trade deficit with Canada. Reminding those who made that point that “Canada fuels American growth supplying 99% of their natural gas imports, 85% of their electricity imports, 60% of their crude oil imports”, Carney added “I don’t think they want us to stop sending any of that energy.”.

With U.S. mid-term elections in the offing, the Prime Minister reminded Trump that Canada was amongst the top three customers for 45 U.S. states, and that in 2025, “Americans sold almost $ 600 billion in goods and services to Canada – “more than $1.6 billion every single day”.

Referring to President Trump’s latest move that would impose a 50% tariff on a range of Canadian goods ranging from hockey equipment, clothing, cement and beer, Carney suggested the “only advantage of this latest threat was that it was a catalyst for more intensive negotiations” by Canada.

Carney pointed out that Canada offered to drop its remaining retaliatory tariffs on strategic sectors – particularly steel, aluminium, and autos – if the US substantially lowered theirs to levels that made it economic for Canadian companies to export to the U.S. He suggested that in exchange for a fair deal his government would encourage Canadian provinces to “return U.S. alcohol to the shelves” a non-tariff measure that had particularly irked Trump.

He warned however that there were things that Canada would not do “we were not prepared to compromise Canada’s sovereignty or to undermine our key industries. He also warned that Canada was not willing to compromise on its sovereign protection on the use of the French language – believed to a reference to some last-minute issues introduced by the U.S. negotiators in relation to French language requirements for business in Quebec and to Canada’s Online Streaming Act.

The Prime Minister made it clear that Canada would respond in kind to the U.S. tariffs that Trump would apply from 22 August with ‘dollar for dollar’ retribution. The Canadian measures will focus on sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. They would include products currently subject to what Canada regards as unjustified Section 232 and 338 tariffs. Section 232 measures include restrictions on goods that the U.S. regards as threatening U.S. security. Section 338 tariffs, which can be up to 50%, apply to imports from countries deemed to discriminate against the U.S.

Carney acknowledged that the tariffs would “raise costs and reduce choice for Canadians”. He recognised that some U.S. companies and U.S. states are innocent bystanders in a dispute that they do not want. While acknowledging that Canada’s retaliatory measures would bring pain, Carney said his administration was pressing ahead in the best interests of Canada. By rejecting a bad deal and by standing up for Canada his government would build Canada ‘strong for all’.

In his concluding remarks Carney characterized the action being taken by the U.S. “as designed to hurt us and divide us” but said that was a miscalculation by the U.S. – that the threat from the U.S. would bring Canadians closer together all of the indications so far is that he has been correct in that view and that the path taken by the Prime Minister has very broad support in Canadian political and amongst the general public.

All available indications suggest that the Canadian public, while aware of the difficulties faced by a trade war with the U.S., supports the decision taken by the Carney administration. Polls taken before the talks with the US collapsed suggest that Canadians, who generally have a very unfavourable view of President Trump, strongly support taking a tough line with the U.S.

Canadian citizens have also directly demonstrated their frustration with the U.S. approach by supporting the actions taken by provincial administrations to remove US-produced alcohols and wines from the shelves. U.S. wine exports to Canada fell by close to 78% in 2025 compared to 2024. In the same period, U.S. spirit sales to Canada fell by over 65%. Canadians have also shown their discontent with U.S. policies towards their country by reducing travel to the U.S. In 2025, travel to the U.S. from Canada has witnessed a dramatic fall-off – with up to 10 million fewer trips being made in 2025 than in 2024, and spending by Canadians in the US down by US$2.4 billion.

What next?

The United States and Canada have entered uncharted territory; there is no obvious ‘off ramp’ from the position in which they both find themselves following the breakdown of talks on Friday.

Having rejected Trump’s high pressure tactics, and deciding to hit back hard against the latest duties, the challenge for Mark Carney is the need will be the need for to convince Canadians that the economic pain is worth the cost of standing up to the Trump administration. All indicators suggest that Carney has the ‘wind in his back’ in that regard – for the moment.

The position for Trump is considerably less positive. In March, a group of 19 State Governors urged Congress to block or reform Trump’s tariff policies in general. Governors in border and manufacturing states with strong links to Canada have been particularly vocal that a trade war with Canada will hit jobs, disrupt supply lines, increase prices and hit tourism earnings.

The development of a trade war with Canada gives the Democrats another weapon to use in November’s mid term elections. It will impact the thirteen U.S. states that share borders with Canada to varying degrees. In the 2026 mid-terms Michigan, New York, Maine, Minnesota, Ohio and Pennsylvania are seen as battleground states with direct borders to Canada or Canadian waters. It could be a particularly important issue in Michigan a swing state with particularly strong connections with Canada. It is also likely to come into play in Maine and in Vermont where Canada is the state’s dominant trading partner.

Seventy days before the U.S. midterm elections, the absence of an obvious path back to the negotiating table places heavier pressure on Washington than on Ottawa. The old assumptions that governed the Canada-U.S. relationship have been discarded. What replaces them remains unclear.

Caption: US President Donald Trump (L) and Canadian Prime Minister Mark Carney arrive at Hotel Royal during the G7 Summit in Evian-les-Bains, France, 16 June 2026. The 52nd G7 Summit takes place in Evian-les-Bains from 15 to 17 June 2026. EPA/YOAN VALAT