US-Canada trade war deepens as Trump revives Depression-era trade tool – what’s at stake for consumers and the midterms

The U.S. and Canada have entered a full trade war after a near-final trade deal collapsed in late August 2026. Canada imposed tariffs up to 50% on hundreds of U.S. goods after the U.S. applied similarly steep, long-threatened levies on Canadian products, invoking Section 338 of the 1930 Tariff Act — a provision never previously used — to impose unilateral 50% tariffs on $20 billion of Canadian exports including auto parts, forestry products, and whiskey.

Trade talks reportedly broke down after U.S. Commerce Secretary Howard Lutnick, under pressure from domestic steel and aluminum producers, withdrew tariff reductions that had been near-agreed, causing related concessions — a reopened Keystone pipeline deal and Canadian liquor shelf restoration — to collapse as well. Canadian Prime Minister Mark Carney responded with his own $20 billion tariff list targeting Wisconsin cheese, Maine seafood, and Kentucky appliances.

Trump called Canada 'one of the worst countries in the world to deal with'; Carney accused him of trying to destroy Canada's auto industry and framed a late U.S. demand for permanent alignment of Canadian trade policy as a sovereignty grab. Economists note Smoot-Hawley's original tariffs are widely blamed for deepening the Great Depression by cutting U.S. trade by two-thirds from 1929 to 1932.

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