The United States and Canada failed to reach an agreement on Friday to avoid the 50% tariffs that President Trump promised last month, further deteriorating trade relations between North America's two largest economies.

The news comes after a month of negotiations between the two sides, following Trump's order to impose 50% tariffs on $20 billion worth of Canadian imports, covering categories such as agricultural raw materials, natural materials, chemicals, textiles, consumer goods, wood products, paper, machinery, and tools.

"In recent weeks, we have made important progress in improving Canada's position as the United States' best global trading partner. However, these advances are not yet sufficient to achieve the goals we have set for Canadians," Canadian Prime Minister Mark Carney said in a statement on Friday. "Therefore, tonight I have decided to suspend trade negotiations with the United States and have instructed Canadian negotiators to return to Ottawa."

Carney said he made the decision because the "last-minute changes" proposed by the United States were "unfair, uneconomical, and cast doubt on the reliability of any agreement." Meanwhile, the United States blamed Canada for the breakdown in talks.

"Despite the U.S. offering Canada the best terms among major exporters to our market, Canada's new demands and reversals on previous commitments undermined the delicate balance reached in recent days," the Office of the U.S. Trade Representative said in a statement on X, adding that the U.S. had proposed "substantial tariff reductions" on steel, aluminum, automobiles, and lumber imports.

As both sides retreated to their original positions, the 50% tariffs ordered by Trump last month and subsequently temporarily postponed have now officially taken effect. Carney said on Friday that Canada would "respond with one-for-one equivalent countermeasures to these tariffs" and would introduce additional measures in the coming days.

In a speech on Saturday, Carney said retaliatory tariffs would take effect on September 8. Although he did not specify the exact rates, he said the tariffs would focus on industries such as steel, dairy products, home appliances, agricultural equipment, pulp and paper, and electronics. Canada has previously imposed retaliatory tariffs on a range of U.S. goods, including steel, aluminum, and automobiles.

This latest development further complicates the outlook for U.S.-Canada trade relations.

The United States and Canada, along with Mexico, had already entered into an annual review process for the USMCA that could last up to ten years, after the U.S. refused last month to extend the trilateral free trade agreement.

Mexico and the United States have held formal bilateral consultations both before and after last month's decision, but progress between Canada and the United States has been relatively limited, and Friday's news adds a new obstacle to negotiations over the agreement's future.

"I still expect the U.S. and Canada to eventually reach an agreement. The two economies are too deeply integrated, and prolonged escalation is unattractive to either side," said Pete Mento, Managing Director of Global Trade Advisory Services at Baker Tilly, in a LinkedIn post. "But the real question is not whether these specific tariffs will survive, but whether a final solution can restore confidence in North American trade rules."