Key events
The lesson from Canada’s collapsed trade talks with the US: negotiation may be futile
Here is some analysis on the looming trade war between the US and Canada:
The calamitous collapse of trade negotiations between Canada and the United States is a warning to nations worldwide that pursuing any kind of dialogue with the current US administration is doomed at the outset, according to observers who say this recent episode indicates seeking a fair deal is futile.
Andrea Lawlor, an associate professor of political science at McMaster University in Ontario, said:
No matter the closeness of the historical relationship, the American administration has signalled that it now prioritises its interests above those of some sort of global economic coordination or harmony.
It feels like these talks ‘failed’. However, I’m not sure there was really a success to be had.
The two countries are now in a deepening trade war after weeks of urgent talks fell apart shortly before the 12am EST (5am BST) deadline on Saturday, when the US imposed 50% tariffs on $20bn (£14.6bn) worth of Canadian goods.
A defiant Mark Carney said on Saturday that he had rejected the deal because of last-minute US demands that would have undermined Canada’s sovereignty. The Canadian prime minister said: “They asked too much and they offered too little … you’re at war when you’re attacked, and we got attacked.” He promised to match US tariffs “dollar for dollar”.
Donald Trump had initially announced the tariffs on 20 July,saying Canada had unfairly discriminated against American businesses.
The core example provided by the White House is Canada’s bans on the sale of US alcohol in eight of its 10 provinces and all three territories. The removal of US spirits, wine and beer from shelves came into effect after Trump’s first round of tariffs, slapped on Canada in early 2025.
The breakdown of talks came as a shock. Trump had claimed on Tuesday that a three-day extension would be applied to the tariff deadline, as an agreement was all but signed. On Wednesday, he told reporters that a “very fair deal for both” sides had been ironed out.
But as details of the agreement began to leak to Canadian media, there was growing alarm that Carney and his negotiators were conceding too much in exchange for lower tariffs on steel, aluminium and cars.
Introduction: Canadian dollar dips after US-Canada talks collapse into trade war; oil prices fall ahead of US sanctions on Iran
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The Canadian dollar fell after the country’s trade talks with the US collapsed on Friday and Washington imposed 50% tariffs on $20bn of Canadian goods, prompting Canada to retaliate.
The Canadian dollar dipped 0.2% to C$1.3798 per US dollar, retreating from a three-month high. It had been strengthening on hopes of a trade deal with the US. The two sides appeared close to an agreement on Friday to lower tariffs on steel, aluminium and cars, but the deal fell apart at the last minute.
Mark Carney, Canada’s prime minister, said they were “walking away from a bad deal”, and would now “match Washington’s new tariffs dollar for dollar”. So that means Canada will face 50% new tariffs on goods including wine, furniture, dairy products, cement, clothing, fishing rods and hockey sticks, covering around 5% of Canada’s exports to the US.
Carney said that their own retaliatory tariffs on US steel, electronics, dairy, appliances, agricultural equipment, pulp and paper and other products would take effect on 8 September. The new US tariffs come on top of existing levies on cars, aluminium, steel and lumber.
Over in the US, president Donald Trump posted that “Canada wants the benefits of being a State, without being one!!! They have also charged our great farmers, for many years, massive amounts of Tariffs. No more!!!”
Analysts at Deutsche Bank led by Jim Reid said:
There’s already been a market reaction this morning to the breakdown of the talks, with the Canadian dollar weakening against every other G10 currency, including a -0.26% fall against the US dollar. Otherwise, Bloomberg also reported overnight that Canada saw little chance of the talks resuming before the midterm elections.
Asian stock markets declined while oil prices also fell as markets waited for details of threatened US sanctions on Iran due later on Monday.
Japan’s Nikkei fell nearly 0.7%, Hong Kong’s Hang Seng dropped 1.9% and South Korea’s Kospi tumbled 3.2%.
China’s Alibaba shares slumped in Hong Kong after it launched a $10.2bn share sale at a sharp discount to fund development of chips, AI infrastructure and models.
Brent crude, the global oil benchmark, lost 1.6% to $92.81 a barrel.
Later this week, the annual Jackson Hole conference kicks off in Wyoming, and the new US Federal Reserve chair, Kevin Warsh, is due to speak on Friday.
His speech comes at a critical time, amid anxiety in government bond markets over inflation and Donald Trump’s tax and spending plans that helped push the national debt to over $40 trillion.
Analysts said bond traders would be looking for signals from Warsh over its commitment to fighting inflation.
The Trump-appointed head of the US central bank has previously signalled reluctance to “spoon-feed” financial markets over how it plans to set interest rates to keep fast-rising prices in check.
However, anxiety over Trump’s handling of the economy and investor fears that his war with Iran is stoking inflation have rocked global financial markets amid a dramatic sell-off in US government bonds.
The Agenda
