Trump Threatens 35% Tariffs on Canadian Goods

In a dramatic escalation of the ongoing North American trade friction, U.S. President Donald Trump announced a sweeping 35% tariff on Canadian goods, to take effect August 1. The move marks a sharp increase from the existing 25% rate and is part of a broader scheme to raise tariffs on more than 20 countries unless fresh trade agreements are reached .

In a letter posted on Truth Social, Trump cited two primary motivations:

1. Fentanyl trafficking—accusing Canada of not doing enough to curb the flow of fentanyl into the U.S., despite data showing less than 1% of fentanyl seizures originate at the northern border.
2. Trade imbalances—specifically the sizeable U.S. trade deficit with Canada ($63 billion in 2024), exacerbated by Canadian tariffs on American dairy and other industries.

Trump also warned that any Canadian retaliation would prompt further tariff hikes. Still, he hinted at possible adjustments to the rates conditional on Canada’s cooperation on fentanyl control.

Scope and Exemptions

The new levy will apply to most Canadian imports. However, exemptions are expected to remain for goods compliant with the United States–Mexico–Canada Agreement (USMCA), and for energy and fertilizer products, which may continue to face existing tariff levels of around 10%.

Sector-specific duties on steel and aluminum (50%) and non–USMCA autos and parts (25%) are separate from the blanket tariff and unaffected by this announcement.

Canada’s Response

Canadian Prime Minister Mark Carney responded via social media stating Canada has made “vital progress to stop the scourge of fentanyl in North America” and pledged to defend workers and businesses in ongoing negotiations.

Canada has already retaliated earlier this year with roughly $20.7 billion in tariffs (25%) on U.S. goods, including autos, in March and April. As of July 11, no new retaliatory tariffs had been announced in response to the 35% threat.

Broader Context

This announcement is the latest salvo in Trump’s aggressive protectionist trade policy. It follows similar threats of 30% tariffs on the EU and Mexico effective August 1, along with sectoral tariffs on copper (50%), pharmaceuticals (up to 200%), and aircraft parts .

Trump has dispatched letters to 23 other countries, threatening blanket tariffs of 15-20% if trade deals are not in place by August 1. Analysts warn these shifting policies are unsettling global supply chains and increasing inflation risks, though lower interest rates have buoyed U.S. markets in recent weeks .

Market Reaction and Economic Risks

Following the announcement, U.S. stock futures dropped—Dow futures fell about 200 points, and both the S&P 500 and Nasdaq slid around 0.5%, as investors weighed the economic fallout.

Market watchers caution that escalating tariffs could raise consumer prices, reignite inflation, and dampen GDP growth. The Federal Reserve has already signaled a wait‑and‑see stance on interest rate cuts amid tariff uncertainties .

Political Fallout and Canada’s Domestic Response

Canada is witnessing a growing wave of nationalistic sentiment. A "Buy Canadian" campaign and a boycott of U.S. goods are gaining traction, reflecting public frustration. Provincial leaders, such as Ontario’s Doug Ford, advocate strong countermeasures, including banning U.S. alcohol, as a form of strategic resistance .

Adding to the tension, Trump has entertained talk of annexing Canada, prompting sharp rebukes from Canadian leadership and a surge in patriotic fervor—but experts view these remarks as political posturing .

What Lies Ahead

With the August 1 deadline looming, both nations are intensifying negotiations. Trump’s ambiguous promise of modifying tariffs based on Canada’s cooperation on fentanyl makes it likely the final tariffs may come with stipulations. Canada, meanwhile, has signaled willingness to continue discussions while defending its economic interests In a broader sense, Trump’s sweeping tariff threats aim to reshape global trade. But this aggressive approach risks prompting retaliatory measures and could fragment longstanding alliances, as trade diplomacy gives way to brinkmanship