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The US and Canada are heading toward an open trade war after talks collapsed
Economy
The Canadian dollar fell on Monday after trade talks between Ottawa and Washington collapsed, leaving both sides facing higher prices on a wide range of imported goods.
On Saturday, the US imposed 50% tariffs on about $20 billion worth of imports from Canada, its second-largest trading partner after Mexico. Dairy products, wine, wood products, ceramics, and a number of other categories were targeted.
Canadian Prime Minister Mark Carney said he would retaliate with "dollar-for-dollar" tariffs starting September 8, targeting sectors such as steel, dairy, agricultural machinery, paper, and electronics. Details will be released "in the coming days," Carney added.
The Canadian dollar was down 0.55% against the US dollar at 4:30 a.m. ET. The loonie also fell against the euro, British pound, and Japanese yen. "As a smaller and more open economy, Canada has more to lose from this, but Prime Minister Mark Carney appears to have opened the door to more fiscal stimulus to support struggling businesses," currency strategists at ING bank wrote on Monday.
Negotiators had been racing to reach a deal all week, with officials hinting that one was close. But by the weekend, the rhetoric had soured, with each side blaming the other for the collapse of the agreement.
Carney said the US "asked for too much and offered too little."
"We were not prepared to give up Canada's sovereignty or undermine our key industries," he declared.
"Canada wants the benefits of statehood without being one!!!" Trump wrote on Truth Social on Sunday. "They've also been slapping huge tariffs on our great farmers for years. Enough!!!"