Trump hit by domestic backlash as Canada trade war threatens higher prices

Donald Trump is facing a domestic backlash over the collapse of trade talks between the United States and Canada, as the countries’ deteriorating relationship risks more financial pain for Americans ahead of midterm elections.

U.S. lawmakers, governors and business leaders warned that Washington’s new tariffs on Canadian goods would increase costs for American households and companies, while a Federal Reserve official said that protracted sparring between the trading partners could help keep inflation stubbornly high.

Trump’s tariffs targeting US$20 billion worth of Canadian goods went into effect on Saturday on top of existing levies on steel, aluminium, lumber and vehicles, after talks between Washington and Ottawa broke down on Friday night.

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Prime Minister Mark Carney said Canada would soon announce “dollar-for-dollar” retaliatory levies on American goods, while U.S. trade representative Jamieson Greer said Washington would respond to Ottawa’s retaliation.

U.S. senator Susan Collins of Maine, a Republican whose state borders Canada, said that the “on-again/off-again trade talks” between the allies would “lead to higher costs, risk and uncertainty for Maine businesses.”

The new tariffs would “increase costs for Maine families, as most businesses will have no choice but to pass on the tariffs to their customers through higher prices”, she added.

Collins, who is facing a tough re-election battle in November as Republicans and Democrats vie for control of the Senate, said Trump “must consider the negative impact of tariffs” and “work to reach a fair agreement” with Carney’s government.

Trump’s first-term vice-president Mike Pence told CNN on Sunday that “the last thing we need right now, as our economy is getting back on its feet, is a trade war with Canada.”