The US Department of Commerce has said it has concluded that imports of Canadian softwood lumber are being unfairly subsidised.
In a statement released on Thursday, it said efforts to reach a negotiated agreement with Canada have failed.
Canada called the decision on countervailing and anti-dumping duties on lumber "unfair, unwarranted and deeply troubling".
This is the latest salvo in a lengthy dispute between the two countries.
The US has set final total tariffs for most Canadian softwood lumber producers at 20.8%. A handful of producers were singled out for individual duties, including one of up to 23.8%.
Except in one instance, those combined countervailing and anti-dumping duties are below preliminary tariffs issued earlier this year.
The final tariffs will be set if the US International Trade Commission (ITC) makes a determination that the US industry was harmed.
An ITC decision is due by 18 December.
In a joint statement on Thursday, Canada's Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr said they "will forcefully defend" the domestic softwood lumber industry.
"We are reviewing our options, including legal action through the North American Free Trade Agreement (Nafta) and the World Trade Organization, and we will not delay in taking action," they said.
Softwood lumber products, like pine, fir and spruce, are mainly used in the construction of single family houses.
The US has claimed for decades that Canada is unfairly subsidising its lumber industry by charging minimal fees to log public lands.
Commerce Secretary Wilbur Ross said in a statement that the US remains committed to "free, fair and reciprocal trade with Canada", and that the decision is based on "a full and unbiased review of the facts in an open and transparent process".
The department said it had determined that Canadian exporters have sold softwood lumber to the US at 3.2-8.89% less than fair value.
It also maintains that the country is providing unfair subsidies at rates from 3.34-18.19%.
The US Commerce Department valued softwood lumber imports from Canada at C$7.6bn (US$5.6bn;£4.3bn) in 2016.
In June, Canada announced C$867m (US$640m;£500m) in relief for the country's lumber industry.
The aid came after the US first slapped hefty tariffs on the import of Canadian softwood lumber in April.
The department announcement comes during a tense point in trilateral talks between Canada, the US and Mexico to renegotiate the North American Free Trade Agreement.