MONTREAL, Canada (AFP) — Canadian Prime Minister Mark Carney said Tuesday that reducing economic ties with the United States would come at a cost but the benefits were clear, as President Donald Trump threatened new penalties targeting Canada.

Canada’s retaliatory tariffs came into effect earlier Tuesday, applying to CAN$27.6 billion (US$20 billion) in US imports, covering steel and aluminum products as well as dairy goods such as cheese.

With the trade war between the North American neighbours heating up, Carney said Canada has “everything we need to pivot and prosper”.

“That pivot will come at a cost. There’s always a cost to action. But it doesn’t come close to the cost of standing still.”

Ottawa’s pushback comes after Trump imposed tariffs on a similar value of Canadian products over what Washington deemed “discriminatory treatment” of US alcohol, automobile, and dairy industries.

Responding to the latest Canadian levies, Trump pledged to restrict Canadian companies from securing US Government contracts.

In a social media post, Trump said he was directing officials “to REMOVE Canadian-origin products from GSA’s Multiple Award Schedules”, referring to a General Services Administration programme for long-term contracts.

Contracts through such schedules account for more than US$50 billion a year, Trump added.

On Monday, Trump threatened to try to block sales of Canada’s Bombardier Aviation unless the Quebec-based plane maker moves manufacturing to the United States.

In response, the aerospace company pointed to its creation of tens of thousands of jobs across the United States, with direct employment in more than 20 states, including Kansas, Texas, Arizona, and California.

The two Republican senators representing Kansas said they had conveyed their concerns to the White House.

“I’m going to fight to keep Bombardier’s more than 1,200 Kansas jobs. I’ve already taken that concern inside the Oval Office,” Senator Roger Marshall posted on X, with similar comments posted by Senator Jerry Moran.

US tariffs pose a modestly negative risk to Canada’s overall economy, but analysts note that they have a sharper impact on central Canada’s manufacturing sector.

Trade lawyer Ryan Majerus said Trump’s latest move restricting Canadian access to US Government contracts “definitely has teeth to it” and could widen the scope of affected goods beyond those hit by tariffs.

“I don’t believe in escalating the conflict. That’s not constructive,” Carney said in his video statement Tuesday. “But our tariffs are necessary to protect our workers, protect our companies, and protect our communities.

“This is about who we are as Canadians.”

Negotiations between the two sides broke down on August 21 after days of meetings in Washington.

At the time, Carney said US negotiators had introduced restrictions on Canadian trade deals with other countries at the 11th hour.

US officials also made unacceptable “threats” to the French language and “Quebec culture,” he added, referring to the French-speaking province in eastern Canada.

Ottawa and Washington have not resumed talks since, and Trump has continued his attacks.

On Sunday, Trump posted an illustration of himself towering over Carney as they played ice hockey, with Trump saying, “Get up, governor,” a reference to his determination to turn Canada into another US state.