The U.S. was set to impose 50% tariffs on $20 billion worth of Canadian products early Saturday after last-ditch negotiations failed to resolve the latest strain in already tense relations between the historic allies. Canada’s leader countered that it would match the tariffs “dollar for dollar.”

In a call with reporters late Friday, U.S. Trade Representative Jamieson Greer said that Canada had declined to finalize the trade deal under the terms that had been agreed to earlier this week.

In his own statement, Canadian Prime Minister Mark Carney said that the “progress” made in the negotiations was “not been enough to meet our objectives for Canadians.”

“As a result, this evening, I have decided to suspend trade negotiations with the U.S. and have directed Canada’s negotiators to return to Ottawa,” Carney said, adding that “Canada will match those tariffs dollar for dollar to protect our workers and businesses.”

President Trump’s import taxes will hit about 5% of what Canada ships to the U.S. every year, including products ranging from hockey sticks to tongue depressors.

But the political impact will likely be even bigger than the economic fallout. Canada has threatened to retaliate against any new tariffs with levies of its own, aggravating a trade fight between countries that sold each other $880 billion worth of goods and services last year.

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

Earlier this week, Carney had said that “substantial progress has been made, although there is important work still to be done.” 

The Trump administration currently imposes a 10% tariff on goods from Canada, the U.S.’s second-largest trading partner after Mexico, though most Canadian imports are exempt because they comply with the U.S.-Mexico-Canada Agreement, a trade deal signed during Mr. Trump’s first term.

Mr. Trump has had a tense relationship with Canada due to trade, NATO, a dispute over a Detroit-area bridge and his threats to make Canada the U.S.’ 51st state.