Former U.S. President Donald Trump has reignited trade tensions with Canada, announcing plans to impose a 35% tariff on Canadian imports starting August 1, unless new trade terms are reached. The move is part of Trump’s broader push to reshape global trade and exert pressure on countries he accuses of unfair practices and contributing to America’s drug crisis.
Letter Sent to Canada as Part of Broader Tariff Campaign
According to sources close to the administration, Trump sent a formal letter to Canadian Prime Minister Mark Carney late Thursday night. The letter outlines the U.S.’s intention to impose the steep tariff unless significant progress is made in addressing U.S. concerns, particularly on trade imbalances and the cross-border flow of fentanyl.
Speaking to NBC News, Trump warned that countries not complying with his terms will face tariffs ranging from 15% to 20%, with Canada being one of the first specifically named. “We’re just going to say all of the remaining countries are going to pay,” Trump said, noting that the specifics are still being finalized.
An administration official added that goods compliant with the U.S.-Mexico-Canada Agreement (USMCA) might be exempt, but no final decision has been made.
A Week of Escalation in Trump’s Global Trade Strategy
The threat against Canada follows a week in which Trump has proposed new tariffs on over 20 countries, including potential 50% levies on copper, as part of what he calls a “reciprocal” trade strategy. Trump emphasized that the stock market’s strong performance—hitting record highs Thursday—shows investor confidence in his approach. “The tariffs have been very well received,” he claimed.
Market Reaction and Economic Fallout
The Canadian dollar briefly fell 0.6% against the U.S. dollar following the announcement, before regaining ground. Meanwhile, U.S. and Canadian stock index futures saw modest declines, with S&P 500 futures down 0.6% and Canada’s S&P/TSX 60 losing 0.4%.
A potential 35% tariff on Canadian goods would disrupt the tightly integrated North American supply chain, particularly for industries like automotive manufacturing, where parts routinely cross the border multiple times.
According to U.S. customs data, bilateral trade between the U.S. and Canada exceeded $760 billion in 2024, making Canada one of America’s most significant trading partners.
Canada Responds: Carney Seeks Resolution by August
Prime Minister Mark Carney, who was elected in April on a platform of defending Canadian economic interests, acknowledged the threat on Thursday night and said his government would work to meet the August 1 deadline.
“Canada has made vital progress to stop the scourge of fentanyl in North America,” Carney said in a post on social media, indicating a willingness to negotiate but offering no firm commitments on new concessions.
Carney has already taken steps to defuse tensions with Washington by recently dropping a proposed digital services tax, which had drawn criticism from Trump for targeting U.S. tech companies. However, that move also prompted domestic backlash, with critics accusing Carney of yielding too quickly.
Ongoing Trade Disputes
Under Trump’s current trade framework, Canada faces a 25% tariff on goods that fall outside USMCA compliance. While Canadian oil and energy products are subject to a lower 10% tariff, steel and aluminum imports continue to be taxed at a full 50% rate.
Canada had previously secured exemptions for auto parts, but the future of those carve-outs remains uncertain.
Former government adviser Dan Nowlan, who served under Conservative Prime Minister Stephen Harper, criticized Carney’s concessions, stating:
“Carney gave up the pretense of standing up to Trump a while ago.”
Outlook
As Trump pushes forward with what he calls a “liberation day” trade policy, countries including Canada have until August 1 to reach revised trade deals or face new tariffs. The decision is expected to have significant economic and political repercussions across North America, with implications for cross-border trade, inflation, and global supply chains.
The coming weeks will be critical in determining whether Canada and other allies can negotiate exemptions or whether Trump’s trade war will intensify further.