Good morning from London, where the flowers in the Festival Gardens outside St. Paul's Cathedral are thriving despite the summer's heat. The trade war between the United States and Canada escalated this morning, as Canada imposed retaliatory tariffs of up to 50 percent on American goods. Talks between the two countries fell apart last month. The tariffs went into effect shortly after midnight. They cover about $20 billion per year of imports from the United States, including goods like clothing, steel and cheese.

"The more pressing concern is a potential cycle of retaliation," my colleague Tony Romm reports. Trump has already threatened additional tariffs on Canadian-made cars and trucks. He suggested last week that he might halt bilateral trade outright. Then, last night, he took to social media to single out Bombardier, a Canadian plane manufacturer, claiming there would be "NO MORE SELLING BOMBARDIER IN THE UNITED STATES!"

The dispute is fracturing one of America's closest alliances, and it is not expected to end soon. When Canada left the talks last month, Mark Carney said his country was "at war." Canadians stood with him: 75 percent of those polled said they supported his decision to exit. But if Canadians are on a war footing, American officials say they are not. "I don't think you can be in a tit-for-tat with someone who's 13 times larger than you are," Scott Bessent, the treasury secretary, said in an interview on CNBC. The strategy, it seems: Might makes right.

A tariff is a tax your government charges people and companies in your country for buying goods from a foreign nation. That tax is often passed on to consumers in the form of higher prices. To avoid it, sometimes companies simply stop importing goods from the tariffed nations and look for them elsewhere. That's happening on both sides of the border.