Carney faces crucial test after walking away from Trump's deal

The longtime allies and economic partners, who have enjoyed free trade for decades, are now in an escalating trade war with no clear off ramp.

And for Prime Minister Mark Carney, the late night decision to suspend talks with President Donald Trump and to retaliate instead of agreeing to a deal that seemed in reach, will be a significant political test.

He is one of the first world leaders to walk away from the negotiating table with the White House - and the outcome will be closely watched.

Both sides have have blamed last-minute changes for torpedoing the tentative deal.

Carney's decision will also challenge the appetite among Canadians to accept some economic pain as Ottawa pushes for more US concessions.

After rejecting Trump's high pressure tactics, and in choosing to hit back against the latest duties, Carney will need to convince Canadians that the economic pain is worth the cost of standing up to the Trump administration in search of a better agreement in the long run.

There is no doubt this will cause pain on both sides of the border, with business facing more pressure from US duties and Canadian counter-tariffs.

Canada sends about 70% of its exports to the US, and the country is the top trading partner for a number of US states, with Michigan, Kentucky, Indiana and Ohio among the most exposed.

Carney came to power with a call for "elbows up" - an ice-hockey term for an aggressive approach - vowing to fight for Canada in the face of a Trump administration keen to exert economic pressure for its America First agenda.

A recent survey by Abacus Data suggested that around 36% of Canadians would support retaliating to US tariffs, while a Leger poll indicated that 56% of Canadians want the federal government to take a hard line and make no more concessions.

Canadians frustrated with the US tariffs have already chosen to avoid travelling there. The boycott has meant a loss of about C$3.3bn ($2.35bn; £1.75bn) in travel revenue for the US last year.

A decision by most provinces to remove US alcohol from store shelves has hammered that sector.

Based on US government trade data, US wine exports to Canada fell 78% year over year, a $357m loss in export value. The US distillers association reported similar numbers - saying provincial bans have caused exports of American spirits to drop by more than 70%.

The ban quickly became a point of frustration for the Trump administration.