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U.S. President Donald Trump has announced a sweeping 35% tariff on Canadian imports, set to take effect August 1, intensifying a growing trade rift between Washington and Ottawa. The move comes after Canada imposed its own counter-tariffs and as both nations struggle to finalize a new trade agreement.
In a letter posted on Truth Social, Trump cited Ottawa’s retaliation and Canada’s alleged role in the fentanyl crisis as justification. He warned Canadian Prime Minister Mark Carney that any further countermeasures would trigger even higher duties: “Whatever the number you choose to raise [your tariffs] by will be added onto the 35% that we charge.”
The new duty is in addition to Trump’s earlier tariffs on specific sectors:
- 50% on steel and aluminum
- 25% on autos
- 50% on copper (starting Aug. 1)
- 10% on energy exports
- 25% on non-USMCA-compliant imports
Trump tied any potential rollback to Canada’s cooperation on controlling fentanyl trafficking. The U.S. has seized over 100 pounds of the drug at its northern border over the past two years, according to Customs and Border Protection.
Canada Pushes Back
Carney responded on X, defending Canada’s efforts to curb fentanyl and emphasizing cross-border cooperation. “We are committed to working with the United States to save lives and protect communities in both our countries,” he wrote.
Canada had earlier imposed 25% tariffs on a range of U.S. goods — from vehicles and computers to food — in response to what it called unjustified steel and aluminum duties. Ottawa has vowed to keep its countermeasures in place until the U.S. lifts its own.
Canada also dropped its proposed digital services tax targeting American tech firms as a condition for resuming trade talks, which restarted on June 29 with a soft deadline of July 21.
Markets React
Financial markets stumbled in response to the announcement. The Dow dropped 279 points (-0.63%), while the S&P 500 and Nasdaq fell 0.33% and 0.22% respectively on Friday. All three indexes broke multi-week winning streaks. Still, broader investor sentiment remains cautiously optimistic — or skeptical — that Trump will follow through. Some analysts point to the “TACO trade” (“Trump Always Chickens Out”) as a growing mindset among traders.
While global markets largely shrugged off similar tariff threats aimed at Brazil earlier in the week, Canada represents a far more integrated and sensitive trade partner. Total U.S.-Canada goods trade topped $761 billion in 2024, with the U.S. recording a $62 billion trade deficit last year — a figure Trump labeled a threat to national security.
What’s Next
With August 1 approaching, the clock is ticking for the two sides to reach an agreement. Trump’s tariff warning leaves little room for compromise unless Ottawa shifts on fentanyl cooperation and other unresolved issues. Canada, for its part, has signaled a willingness to negotiate — but not to concede.
