Kathmandu— After negotiations broke down, Canadian Prime Minister Mark Carney announced retaliatory tariffs mirroring those recently imposed by U.S. President Donald Trump on $20 billion of Canadian goods – representing 5.5 percent of its total exports. The move follows Trump’s imposition of a 50 percent levy on a wide range of Canadian products, disrupting decades of stable trade relations between the two nations and prompting concerns about economic fallout for both economies.

Talks Collapse Over Sovereignty Concerns

Negotiations between Canada and the US failed after Trump set conditions deemed unacceptable by Carney. According to Carney, the U.S. proposed terms that were “uneconomic, unfair,” and questioned Canada’s ability to independently forge new trade deals. “They wanted to restrict that,” he said, adding that US negotiators also made unacceptable references to Quebec culture and language.

Products Hit by New Tariffs

The U.S. tariffs cover over 500 product categories from Canada, including alcoholic beverages like Crown Royal whisky and Molson beer, dairy products, technology such as smartphones and radar equipment, athletic gear – notably hockey equipment – wood products, and seasonal goods. Notably, cheese was excluded despite Trump citing Canadian “discrimination” against US cheeses. In response, Canada’s retaliatory tariffs will target steel, dairy, appliances, farm equipment, pulp and paper, and electronics beginning September 8th.

Economic Impact Anticipated

Experts predict the trade war will negatively impact both economies, raising costs for businesses and consumers alike. Al Jazeera’s David Mercer reported from Calgary that the tariffs are expected to lead to increased prices, unemployment, and potential bankruptcies for small and medium-sized businesses. Julian Karaguesian of McGill University stated the tariffs would “effectively price hundreds of Canadian goods out of the US market,” while Steven Okun noted key industries like alcohol, dairy, and furniture will be particularly affected. Despite 73 percent of Canadian exports going to the U.S., Carney is attempting to diversify trade relationships with countries in Asia and Europe.

US Tariffs Face Criticism

The Business Roundtable warned that the new tariffs “risk raising costs for American businesses and families” and urged a return to negotiations. Trade specialist Steven Okun explained Trump’s broad tariff policy has not increased trade or investment, but instead contributed to inflation. He contrasted this with targeted tariffs which he believes can be effective when addressing specific unfair practices. Diamond Isinger, former advisor to Prime Minister Trudeau, stated that while the situation will cause pain for both countries, retaliation was a necessary step.

Both Canada and the United States are bracing for economic consequences as the tit-for-tat tariffs take effect, with ongoing uncertainty surrounding the future of the US-Mexico-Canada Agreement.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.