The United States imposed 50% tariffs on $20 billion in Canadian goods after trade talks collapsed.

Trade talks between the United States and Canada collapsed shortly before midnight on Aug. 22, setting off a new round of tariffs that is expected to raise costs for wineries, distillers, importers and restaurants on both sides of the border.

The new U.S. measure imposes a 50% tariff on $20 billion of Canadian goods, a total equal to about 5% of Canada’s exports to the American market. The tariffs took effect at midnight after weeks of negotiations failed to produce an agreement that would have stopped the action. The affected products cover several sectors, including lumber, Canadian wine and Canadian whiskey.

The latest move deepens a trade fight that had already spread well beyond heavy industry. Last year, the United States imposed tariffs on Canadian steel, aluminum, lumber and automobiles. In response, governments in eight of Canada’s 10 provinces ordered American wines and spirits removed from retail stores and restaurants. That retaliation hit a major export channel for U.S. producers, since Canada is the largest foreign market for American wine.

The financial impact on the wine business has already been significant. The provincial bans have cost California wineries close to $1 billion a year, according to figures cited by industry officials. Now American buyers are also expected to face higher prices on Canadian products that remain in the market. Those include wines from the Niagara Peninsula in Ontario and the Okanagan Valley in British Columbia, as well as major spirits brands such as Crown Royal and Fireball. Impact Databank, a sister publication of Wine Spectator, estimates the U.S. retail value of Crown Royal at $2.4 billion and Fireball at $1.45 billion.

The breakdown in talks led both governments to accuse the other side of changing terms late in the process. Canadian Prime Minister Mark Carney said U.S. demands shifted during the negotiations and made a final agreement impossible. Speaking at a news conference in Ottawa on Aug. 22, Carney struck a confrontational tone and said Canada would not accept pressure from Washington. He said his government would continue trying to reduce the country’s dependence on the United States.

Several media reports said U.S. Commerce Secretary Howard Lutnick objected to parts of a proposed arrangement on metals and automobiles that had been discussed by U.S. Trade Representative Jamison Greer. A White House spokesperson denied those reports and said Canadian officials, not the United States, had raised their demands during the final stretch of the talks.

Canadian officials also said one late U.S. demand involved Quebec’s language rules. The United States has argued that the province’s law requiring products sold there to include French translations acts as an unfair trade barrier. Canadian negotiators said Washington pressed for the measure to be dropped as part of the broader deal, adding another dispute to already tense talks.

The collapse of the negotiations also appears to have ended, at least for now, a possible opening for American wine and spirits producers in Canada. During the talks, Carney had asked provincial leaders to consider lifting their bans on U.S. alcoholic beverages if a trade agreement was reached. With no deal in place, those restrictions are now expected to remain.

That outcome has alarmed the hospitality industry as well as producers. In a statement after the tariffs took effect, the Toasts Not Tariffs coalition said it supported efforts to return American wine and spirits to Canadian shelves but warned that the new U.S. tariff would also hurt businesses at home. The group said bars, restaurants and hotels across the United States depend on a broad range of imported wines, spirits and glass bottles, and that higher import costs will add to pressure on companies already operating in a difficult economy.

The dispute has become especially sensitive for alcohol producers because supply chains in the sector are closely tied across the border. American distributors sell Canadian whiskey and wine into U.S. markets, while Canadian retailers and restaurants have long carried large volumes of California and other American wines. Producers, importers and hospitality businesses now face a more uncertain market as both governments dig in and the chances of a quick reversal appear limited.

For consumers, the immediate effect is likely to be higher prices and fewer choices. For producers, the concern is that a trade fight that began with steel, aluminum and autos is becoming more deeply rooted in food and beverage markets, where brand loyalty, distribution contracts and restaurant purchasing patterns can take years to rebuild once they are disrupted.