What to know about Canada's escalating trade war with the U.S.

Canadian lumber products are shown at Gutherie Lumber Tuesday, Aug. 25, 2026, in Livonia, Mich. Paul Sancya/AP hide caption

TORONTO — Canada struck back at U.S. President Donald Trump on Tuesday with tariffs on about $20 billion worth of U.S. goods, in response to the latest round of tariffs on Canada.

The outcome could resonate far beyond Canada, showing other governments whether a smaller U.S. ally can withstand Trump's economic pressure.

Canadian Prime Minister Mark Carney says U.S. demands could hollow out key Canadian industries and limit the country's independence, while Trump's threats to Canadian sovereignty have rallied the public behind him.

"Carney and Canada have become symbolic of resistance to him," Canadian historian Robert Bothwell said. "And what he'll want to do is make an example of Carney and Canada and theoretically terrify everybody else while in fact showing them that they need to remove themselves even further from the United States."

The tariffs hit hundreds of American products, including steel, aluminum, cheese, appliances, clothing, cosmetics and farm equipment, at rates of 15%, 25% or 50%.

Canada says its tariffs match Washington's dollar for dollar and rate for rate. They take effect at 12:01 a.m. Tuesday under an executive action known as an order in council and cover about $20 billion in American goods, roughly 6% of the $333.6 billion the United States exported to Canada last year.

RBC Economics, the research arm of the Royal Bank of Canada, said the measures were unlikely to dent U.S. growth overall but could hit some businesses hard.