 Anglo-American relations were in a poor state, and Canadian foreign relations were matters handled from London.The withdrawal of the Americans in 1866 from the Reciprocity Treaty had increased tariffs on Canadian goods in US markets.Much of present-day Canada remained outside confederation—in addition to the separate colonies of Prince Edward Island, Newfoundland, and British Columbia, which remained governed by the British, vast areas in the north and west belonged to the British and to the Hudson's Bay Company.