US bans nearly USD 1 billion in Canadian goods, deepening trade fight

US-Canada ties, already under strain, are set to worsen after the United States pressed ahead early on Tuesday with a ban on nearly USD 1 billion worth of Canadian imports, including alcoholic beverages, dairy products and motorcycles. The move is the latest step in President Donald Trump's second-term trade fight with one of America's closest allies and biggest trading partners.

The ban is small when measured against the USD 880 billion in annual two-way trade between the two neighbours, and analysts expect the immediate economic effect to be limited. Even so, it marks a fresh escalation in a dispute that is also casting a shadow over efforts to renew the US-Mexico-Canada Agreement.

The latest round of the dispute began over the summer when Trump used a Great Depression-era law to impose 50 per cent tariffs on about USD 20 billion worth of Canadian imports, alleging that Canada discriminates against US dairy, auto and alcoholic beverage producers. Canada quickly responded with tariffs of 15 per cent, 25 per cent or 50 per cent, matching US imports dollar for dollar. To punish Canada for retaliating, Trump ordered a ban on a list of Canadian products, effective 12.01 a.m. Eastern time on Tuesday.

The import ban "certainly won't do anything to help the trade tensions between the United States and Canada," said trade attorney Patrick Childress, a partner at Holland & Knight and a former US trade official.

Childress said the direct economic impact was likely to be modest because the banned goods were already facing steep tariffs. "For a lot of these goods, the 50 per cent was already acting as a de facto ban by making importation from Canada into the United States uneconomical," he said.

Jacob Jensen, director of trade policy at the centre-right American Action Forum think tank, estimated that the ban would cover USD 967 million worth of Canadian imports, based on 2025 numbers. He said 87 per cent of that total would be alcoholic beverages, which the US targeted after some Canadian provinces responded to Trump's earlier moves by removing US alcohol from shop shelves.

The ban also covers some dairy products, including whey, a milk byproduct. The two countries have long disagreed over Canada's efforts to shield its dairy industry from foreign competition by imposing high tariffs once dairy imports cross a quota. Motorcycles are also included. Bombardier Recreational Products in Quebec said its three-wheel Can-Am Spyder and Canyon motorcycles "will be excluded from importation into the US". However, the company said the effect was unlikely to be felt until next year because most production and shipments for the current season had already been completed.

Independent spirit distillers and beer brewers are expected to feel the impact more than some larger Canadian brands that may be able to work around the restrictions. Crown Royal, for instance, can ship whisky in bulk for processing and bypass the ban, while Labatt Brewing Co. has some bottling operations in the US, allowing some of its beer to remain exempt. Diageo, which owns Crown Royal, and Anheuser-Busch InBev, which owns Labatt, did not respond to requests for comment.

One business already affected is Wolfhead Distillery in Amherstburg, Ontario, just across the Detroit River from the US. The distillery has stopped shipping whiskey to Michigan because of the tariff dispute and the new ban on Canadian alcohol. "It's really unfortunate," said Danielle Moldovan, the distillery's director of marketing. "We are a border town. The Americans are great friends of ours, and they visit our distillery on a daily basis."

Moldovan said she was worried about the longer-term effect on the business. Buyers in Georgia had shown interest in importing Wolfhead's Coffee Whisky, while its Michigan importer was considering its Vanilla Almond Biscotti and Banana Caramel Vodka. But, she said, "those products are going to be put on hold right now until we have further clarification about what's going to happen, how long this ban's going to last".

Jensen said the move could trigger another response from Canada. "This marks yet another escalation in the trade war that may result in further retaliation on the Canadian side," he said. He added that Canadian exporters and US importers "impacted by these bans will be highly motivated" to push trade officials on both sides towards a "resolution of this whole ordeal".

The deadlock also threatens efforts to renew the US-Mexico-Canada Agreement, the North American trade pact Trump pushed through in his first term and once praised as "the most modern, up-to-date, and balanced trade agreement in the history of our country". The agreement allows most goods to move across North American borders without duties, but the series of tariffs announced since Trump's return to the White House last year has clouded the outlook for trade in the region.

Trump has directed much of his criticism at Canada. He has openly sought to draw Canadian manufacturing into the US and has angered opinion in Canada by repeatedly suggesting that the country should become America's 51st state. Canadian Prime Minister Mark Carney, who came to office last year promising to stand up to Trump, has not only retaliated against US tariffs but has also moved to reduce Canada's dependence on the American market, which took more than 70 per cent of Canadian exports last year.

"There is now a price to be paid for access to the United States market," Carney said earlier this month. He wants to double Canada's non-US trade over the next decade. He has backed the idea of Canada becoming the European Union's first associate member and said last week that trade talks with India were making "good progress" and that both sides were aiming to conclude them by the G20 summit in mid-December. Earlier this year, Carney also broke with Washington by striking a deal with China to allow a limited number of Chinese electric vehicles into Canada at a sharply reduced tariff in return for China lowering tariffs on Canadian canola.

Gabriel Brunet, a spokesperson for Canada-US Trade Minister Dominic LeBlanc, said: "We take note of the coming into force of the Administration's previously announced trade measures. Our first priority remains on protecting and supporting Canadian workers, farmers, families, and businesses from these unjustified actions. Our core focus is on what we can control: building strength at home, diversifying our partnerships abroad, and building Canada strong for all Canadians."

Trump, however, said he believed Canada would eventually give way. "They're gonna come in and they're gonna say, Sir, we are sorry," he told reporters on Monday. "They've treated the United States very, very badly. I think a deal will be made but it's gonna be fair."

Asked about those remarks on Tuesday, Carney did not respond directly but said Canada remained open to negotiations. "Canada stands ready to negotiate in good faith" towards "a mutually advantageous trade arrangement that respects both our countries' sovereignty," he said. He also left open the possibility of more Canadian retaliation, saying he would "never rule anything out". Asked if Ottawa could raise trade pressure as the US midterm elections drew closer, Carney said Canada would not time its response around the American political calendar.

Carney also said Canada could help bring down living costs in the US and argued that energy, food, information and financial security were best supported through dependable partnerships. "Canada is a reliable partner, and we're ready to work in any or all of those areas," he said.

Childress said the confrontation was likely to last for months rather than weeks, as the tariffs and bans so far "probably won't cause enough economic upheaval to force either party back to the negotiating table". For now, the new import ban may have only a limited direct effect, but it adds another layer to a dispute that is straining a major trade relationship and leaving the wider North American trade framework under pressure.