Trade negotiations between the United States and Canada have collapsed, raising fears of a renewed trade war between the two North American neighbours.

The breakdown came late Friday after several days of negotiations that US officials had said were moving towards an agreement to avert sweeping new tariffs.

Canada rejected what Washington described as the final terms of a proposed deal, prompting the US to proceed with new tariffs on Canadian imports.

The US has imposed 50 per cent tariffs on about $20 billion worth of Canadian goods, affecting roughly five per cent of Canada’s exports to the US.

The affected products include items such as hockey equipment, cement and some consumer goods, while several categories covered by the existing trade agreement remain exempt.

Canadian Prime Minister Mark Carney said Ottawa would respond with “dollar-for-dollar” retaliatory measures against the new US tariffs.

Carney also suspended further trade negotiations, citing last-minute changes by Washington that Canada considered unacceptable.

The collapse of the talks threatens to further strain economic relations between the two countries and complicate efforts to renegotiate the United States-Mexico-Canada Agreement.

The US and Canada have extensive economic ties, with bilateral trade running into hundreds of billions of dollars annually.

Trade experts have warned that prolonged tariffs could hurt businesses and workers in affected sectors, disrupt supply chains and increase costs on both sides of the border.

The latest development marks a significant escalation in tensions between the two longtime trading partners, with both governments now preparing for the economic consequences of further retaliatory measures.