The US-Canada trade negotiations collapsed at the final moment, prompting President Donald Trump to declare it was "time to teach Canada a lesson." A week has passed, yet no new developments have emerged from the talks. On August 27, US Trade Representative Greer employed notably softer language, which some Canadian officials interpreted as a potential goodwill signal—until Trump publicly signed an executive order with retaliatory overtones, renaming Lake Ontario as "Lake America."

With no resolution in sight, what impact will this prolonged trade war have on both nations, and where are things headed? Chen Bo, a former researcher at the Asia Pacific Foundation of Canada and a distinguished professor at Hainan University, told reporters that a key milestone arrives in October, when the US, Canada, and Mexico are expected to negotiate specifics for next year's USMCA terms. He noted, "If Canada hastily compromises now, it loses crucial leverage and may face even more demands from the US at the October talks, forcing further concessions."

So where exactly did things go wrong? Currently, Greer leads the US negotiating team for the Canada talks. However, reports indicate the deal stalled because US Commerce Secretary Lutnick objected to the proposed tariff reduction levels on Canadian steel, aluminum, and automobile imports—sectors under his jurisdiction. The Trump administration designated these industries as national security concerns under the Trade Expansion Act of 1962. Canadian Prime Minister Carney also pointed to internal US divisions when explaining why Canada walked away from the table. While the White House denies any rift between Greer and Lutnick, seasoned observers remain skeptical.

"Lutnick sees all of this as his turf, while Greer is the one conducting the negotiations," said William Reinsch, senior adviser at the Center for Strategic and International Studies and former US Under Secretary of Commerce. "It seems Greer is willing to make more concessions in talks than Lutnick would." Wendy Cutler, former US Trade Representative, added, "From Canada's perspective, this is a divergence that emerged late in the talks, leading them to believe the US keeps changing the established rules. I think the challenge for this administration is that Greer handles trade matters while Lutnick oversees Section 232 investigations—and those involve many sensitive issues." Another factor potentially complicating the situation is Peter Navarro, the White House senior adviser for trade and manufacturing, viewed by analysts as a "Trump whisperer" on Canadian affairs, though his influence is widely considered diminished compared to the first Trump term. Navarro has recently voiced clear concerns about USMCA in interviews.

Is there room for a turnaround? The impact of tariffs varies across different US states and Canadian provinces. Current US tariffs on $20 billion worth of Canadian goods took effect on August 22, with all provinces expected to feel some effect—British Columbia, Quebec, and Ontario bearing the brunt. Ontario has already seen multiple auto parts and assembly plants announce layoffs and production cuts, with estimates suggesting tens of thousands of manufacturing jobs lost since early 2025. Quebec, a producer of steel, copper, and aluminum, saw its metal exports drop 36% between February 2025 and February 2026, with industry employment down 3.6%, according to July data.

On the US side, certain swing states will feel the sting of Canadian retaliation more acutely. Starting September 8, Canada will impose tariffs on $28 billion worth of American goods, covering everything from steel and furniture to cosmetics and toilet paper. According to Statistics Canada data, swing state Ohio will suffer the worst hit, with $3.2 billion—or 12% of its total exports—facing new Canadian tariffs; Illinois and Pennsylvania follow closely behind. For Ohio, steel tariffs and duties on washing machines will be particularly damaging. With agricultural equipment giant John Deere headquartered in Illinois, new tariffs on farm and construction equipment will have a significant impact there.

Derek Holt, economist at Scotiabank, noted that Canada's counter-tariffs appear "carefully designed" to target swing states that could shape the upcoming US midterm elections. Chen Bo also told reporters that Canada's retaliation list precisely targets specific key US states, their pillar industries, and employment bases—directly linked to the November midterm elections. On September 1, Carney again accused the Trump administration of "making memes" and "sneering" at Canada amid the escalating trade war. He stated that "a positive opportunity for a mutually beneficial trade agreement has always existed" with the US, provided it respects Canadian sovereignty and the right to protect and promote Quebec culture and the French language. "When Americans stop making memes, stop sneering, stop posturing tough, and start taking these discussions seriously, we can have those discussions," Carney said.

What areas still hold negotiation room? Regarding the 13 US demands and the current impasse, Chen Bo believes some issues remain negotiable. First, on critical minerals purchase rights: the Carney government has clearly indicated energy is not within the scope of sanctions or weaponization, signaling Canada does not want a full-blown confrontation and still hopes to keep the conflict contained. "As long as America's demands stay within reasonable bounds, mineral priority rights are a negotiable issue."

Second, on the digital services tax and news bill: Chen noted, "Canada's previous digital tax legislation primarily followed European regulatory models, and Canada has already made partial withdrawals and adjustments—this is a relatively easy topic with flexibility." Third, dismantling agricultural protections remains one of America's core demands. The US has long sought access to Canadian markets for dairy, livestock, and meat products, arguing it faces unfair barriers. But for Canada, agricultural protection functions more as a defensive counter-lever and bargaining chip—one it retains precisely to wield in negotiations. "This area also offers room for discussion," he said. Fourth, extending pharmaceutical patent protection remains a highly contentious issue. In practice, due to overly long patent protections for domestic drug companies, US drug prices are extremely high, prompting many Americans to drive across the border to Canada on weekends for cheaper equivalent medications. US pharmaceutical giants have long lobbied for Canada to adopt identical patent protection periods to raise prices. While reluctant, Canada views this as somewhat negotiable on a technical level.