Stock futures slip as US and Canada barrel toward full-blown trade war

US stock futures dropped in after-hours trading on August 21 after the Trump administration’s 50% tariff on roughly $20 billion worth of Canadian goods officially kicked in just past midnight on August 22. The S&P 500, Nasdaq 100, and Dow all slid as investors processed the reality that the largest bilateral trade relationship in North America just got a lot more expensive.

Canada isn’t taking it quietly. Prime Minister Mark Carney announced retaliatory tariffs on American imports, set to take effect September 8. Steel, dairy, and a range of consumer goods are all in the crosshairs.

What happened and why markets flinched

Negotiations between Washington and Ottawa broke down on August 21, and the administration moved fast. The new tariffs cover more than 500 product categories, including softwood lumber, steel, and appliances. That represents approximately 5% of Canada’s total exports to the US.

To put the trade relationship in perspective: the US and Canada exchange nearly $900 billion in goods and services annually.

Canadian Prime Minister Mark Carney described the US position as asking “too much, offered too little.”

The breakdown wasn’t entirely unexpected. Previous tariff disputes between the two countries throughout 2025 and into 2026 had already strained relations under the USMCA framework. In February 2026, the Supreme Court actually invalidated some earlier tariff measures, briefly calming tensions.