US-Canada trade war escalates as Trump threatens tariff hike on autos after Carney vows to retaliate

Aug 25, 2026 - 03:05

Mark Carney accused Trump of wanting to 'destroy' Canada's auto industry, and said he would only resume trade talks if the US comes with the 'right attitude'. Donald Trump accused Canada on Monday of 'ripping America off', threatening to hike US tariffs on Canadian autos in the new year.

President Donald Trump has threatened to increase tariffs on automobiles originating in Canada, as well as auto parts, from 25% to 50% as of 1 January. This move comes after US-Canada trade talks collapsed late last week, with each side accusing the other of making unreasonable last-minute demands.

Prime Minister Mark Carney called Trump's latest levy threat unsurprising and accused the president of wanting to destroy Canada's auto industry. He added that Canada is ready to resume talks if the US comes with the 'right attitude'. The trade war also put into question the future of an existing North American trade pact, known as the UMSCA, that was signed by Trump in his first term with Canada and Mexico.

Experts warn that a dismantling of USMCA could have dire economic consequences for Canada. While unlikely, escalating trade tensions means the risk of the USMCA unravelling has increased, which would plunge Canada into recession and leave it on a permanently lower growth path. Carney faces crucial test after walking away from Trump's deal.