"This Really Does Feel Like We're Going Through a Messy, Angry Divorce"

Canada's trade war with the United States escalated sharply over the summer when negotiations collapsed. The U.S. had threatened $20 billion in new tariffs on Canadian goods, and after Canada walked away from the bargaining table, the Trump administration followed through. Canada responded in kind. The new Canadian levies range from 15% to 50%, covering roughly $20 billion worth of American products. Tariffs on U.S. steel, aluminum, and iron products doubled to 50%, and other targeted goods include furniture, clothing, appliances, and dairy. Prime Minister Mark Carney pledged to "hit back against Trump's bullying dollar for dollar, rate for rate."

Canadian economist Mike Moffat, founding director of the Missing Middle Initiative, joined Prof G Markets to explain how the situation arrived at this point and what it means for both economies. According to Moffat, the precise tipping point in negotiations remains unclear. "Canada not wanting to negotiate through the media" played a role, he said, but "sounded like there were some last-minute changes that the Trump administration put on a deal that the Carney administration just couldn't abide to." The talks were meant to remove the threatened tariffs entirely. Instead, they fell apart, and both sides moved to retaliatory trade measures.