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Canada's Prime Minister Mark Carney said he had suspended trade negotiations and Canada would retaliate dollar for dollar on the new tariffs.

Dominic LeBlanc, the minister responsible for Canada-U.S. trade, returned to Ottawa on Wednesday to meet Canadian Prime Minister Mark Carney, who was also set to chair Cabinet and a virtual meeting with provincial and territorial leaders.

Prime Minister Mark Carney said in an X post Wednesday, "We are now moving towards an agreement that reinforces that Canadian advantage, including by securing the best terms in each of Canada's most important strategic sectors and providing greater certainty about our future trading relationship."

So Trump has looked for other legal authority to justify tariffs. To hit Canada, he reached back to the Great Depression, invoking Section 338 of the Tariff Act of 1930 to threaten 50% tariffs on products that account for about 5% of Canadian exports to the United States.

“Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week,” Greer said in a statement.

The tariffs were initially supposed to kick in at 12:01 a.m. Wednesday. But Trump extended the deadline for three days to allow talks to continue, but the two countries still could not reach an agreement in time.

The two countries had good reasons to find a compromise. Nearly 72% of Canada’s goods exports last year went to the United States. And the Trump administration might be wary of imposing a hefty new tariff - paid by U.S. importers who try to pass along the cost to consumers via higher prices - ahead of November’s midterm elections. American voters are already frustrated with the high cost of living.

An agreement could clear the way for a broader trade deal The U.S. is renegotiating a North American trade pact - the U.S.-Mexico-Canada Agreement - that Trump strong-armed America’s neighbors into accepting in his first term. The U.S. has begun formal USMCA negotiations with Mexico but not with Canada.

"Let it sit on the shelf," he said. Quebec Premier Christine Fréchette, whose province is home to a large dairy industry, said on Thursday that she was analysing what the deal will mean for Quebec farmers before deciding on whether to restore US alcohol sales.

The White House says the emerging deal includes a Canadian commitment to address restrictions on U.S. alcohol. But Carney cannot order provinces to restore sales.

Eight of Canada’s 10 provinces restrict or ban U.S. alcohol - measures imposed in retaliation for Trump’s previous tariffs on Canadian goods and amid anger over his repeated talk of making Canada the 51st U.S. state.