India, Sept. 9 -- The economic relationship between the United States and Canada is entering unfamiliar territory as a dispute that once centred on tariffs now moves towards outright import restrictions and a broader rethink of trade ties. Washington has announced plans to block certain Canadian dairy products, alcoholic beverages and motorcycles from entering the US, while Ottawa has responded with tariffs on about $20 billion worth of American goods.

The latest confrontation came just hours after Canada's retaliatory measures took effect, pushing the two longtime allies into another round of economic retaliation. The US restrictions will take effect on September 29, adding another layer to a dispute that has already disrupted businesse...