Canadian Prime Minister Mark Carney is preparing to unveil new retaliatory tariffs against the United States, marking his most significant confrontation yet with Donald Trump and testing his leadership at a critical moment. The move follows the collapse of trade talks on Friday, when Carney withdrew from negotiations shortly before Trump's 50 per cent tariffs on $20 billion of Canadian goods were due to take effect, prompting the president to warn Canada of consequences "far worse" than current measures unless it "falls in line."

Carney has indicated Canada may abandon dollar-for-dollar tariff matching in favour of more targeted retaliation designed to protect domestic workers and key industries such as autos, steel and aluminium, which he says the US wanted to "destroy" during negotiations. Finance Minister François-Philippe Champagne and other cabinet ministers are due to detail support for affected workers on Tuesday. Trump has accused Canada of "ripping off" the US for years, while analysts suggest Carney is signalling that Canada will no longer be a compliant partner. Ontario Premier Doug Ford has also escalated rhetoric, threatening to cut electricity exports supplying 1.5 million US homes and businesses in response to new tariffs on Canada's auto sector.