The Canadian government began collecting tariffs Tuesday on billions of dollars worth of U.S. goods as part of an escalating trade war between the two nations.

The new tariffs, with rates of up to 50%, are intended to match U.S. tariffs imposed by President Donald Trump on August 22 on Canadian imports “dollar for dollar.” The counter-tariffs apply to products including steel, paper, dairy, agricultural equipment and appliances. Among the products facing the full 50% tariff are toilet paper, wood flooring and some dairy products.

In a video released Tuesday, Prime Minister Mark Carney said no country can hold Canada “hostage”, but he also said he doesn’t believe in escalating the conflict. “That’s not constructive,” he said. “But our tariffs are necessary to protect our workers, protect our companies, and our communities.”

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Carney has promoted a “Build Canadian” campaign encouraging companies to increase domestic production. Last week, the Canadian government announced a multibillion-dollar deal to build rail cars in Canada that previously were manufactured in the United States.

In Tuesday’s video, Carney acknowledged that Canadians will feel the impact of these new retaliatory tariffs, and he said his government is pledging $7.5 billion to help Canadian businesses that bear the brunt of the cost.

Carney is one of the few world leaders willing to stand up to Trump on tariffs, and Canadians are standing behind their prime minister. Christopher Gundermann, an economics program fellow at the Center for Strategic and International Studies said, “This is a fight Canadians think that they are justified in pursuing and in winning, and that means that they are willing to consume domestically produced goods, even if they’re slightly more expensive.” He went on to say “Canada now, like China before it, was very committed to winning this trade war, and I don’t see that commitment going away soon.”

Tuesday’s escalation of the trade war will impact American businesses as well. Gundermann said Canada’s retaliatory tariffs are especially bad for manufacturing in the Midwest, and he said small businesses will be disproportionately impacted. But, it can be hard to pinpoint exactly what effect these new tariffs will have. “Under the [US, Mexico, Canada Trade Agreement] goods tend to go back and forth many times before becoming the final good that you, the consumer, buy. So breaking down these tariffs and what is the Canadian part and what is the Mexican part and what is the U.S. part is incredibly difficult and that’s because these economies have become so intertwined,” Gundermann said.

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Since Carney announced the retaliatory tariffs last month, Trump has responded in several ways. First, he ordered the U.S. government to rename Lake Ontario as Lake America. He also posted on Truth Social that Canadian aircraft manufacturer Bombardier must begin producing planes in the United States.

“Their products aren’t good enough! Over 50% of their revenue comes from the United States — They live off American buyers, American companies, American airports, and American service — all while Canada blocks our GREAT American banks and companies throughout the U.S.A.,” Trump wrote on Truth Social. “They even blocked Gulfstream Aerospace from doing business in Canada — completely unjust and unfair! That Era is OVER! If they want our market, they must build here and stop treating America like a ‘piggybank.’”

In response, the president of a manufacturing trade group in Canada noted that Bombardier uses U.S.-made GE and Honeywell jet engines and employs about 3,000 U.S. workers.

The escalating trade war has also affected Canadian tourism to the United States. Statistics Canada data showed a 21.5% decline in return trips from the United States to Canada in 2025 compared with 2024. Early 2026 figures showed the decline in Canadian travel to the United States continued.