On Thursday, U.S. President Donald Trump signed an executive order that escalates tariffs on Canadian goods to 35% starting at midnight Friday. This move comes as negotiations for a new trade agreement between the U.S. and Canada have stalled. Alongside the tariff hike on Canada, Trump also positioned new tariffs on numerous U.S. trading partners, effective in seven days. The White House cited Canada’s insufficient cooperation in addressing the influx of fentanyl and other illegal drugs into the U.S. as a primary reason for the increased tariffs. Additionally, the statement referenced Canada’s retaliatory tariffs on American goods as a further provocation necessitating this action.
The increase places pressure on trade related to the Canada-United States-Mexico Agreement (CUSMA), though it was confirmed that goods traded under this agreement will remain exempt from the new higher tariff. In a significant twist, any goods re-routed through other countries to evade the tariff will now incur a steep 40% charge. Trump’s remarks earlier in the day underscored his long-standing grievances with Canada, which include its management of the dairy sector and military spending. He framed these tariffs as a means to ensure fairness in trade relations, criticizing what he perceives as Canada’s poor leadership.
As negotiations continue, Canadian officials have refrained from detailing the status of discussions, with the Canadian Trade Minister, Dominic LeBlanc, present in Washington at this time. The Prime Minister’s Office also declined to confirm any recent communications between Prime Minister Mark Carney and Trump. This postponement of negotiations, which initially anticipated an agreement by August 1, raises concerns about the future of trade relations between the two nations. In a previous letter to Carney, Trump warned that any increase in Canadian tariffs would be met with an equivalent adjustment to the 35% tariff on Canadian exports to the U.S.
This executive action by Trump stems from ongoing tensions regarding drug trafficking, particularly fentanyl, which he has frequently blamed Canada for. Although Canada has implemented measures such as hiring a fentanyl czar and increasing border security, U.S. Customs and Border Protection data indicates that a significant majority of fentanyl entering the U.S. originates from Mexico. Notably, while fentanyl seizures at the northern border have recently increased, they still account for approximately 1% of the overall fentanyl seized in the U.S.
The urgency of the crisis was highlighted by the White House, which claimed that the amount of fentanyl seized this fiscal year at the northern border could potentially cause over 16 million overdose deaths due to the drug’s potency. Canada’s retaliatory tariffs were criticized as complicating collaborative efforts to confront this escalating drug crisis. Canadian officials, however, have tempered expectations regarding a swift trade deal, with Trade Minister Carney emphasizing the need to secure the best possible agreement for Canadians.
The situation further escalated as Trump criticized Canada’s decision to recognize a Palestinian state, stating that this complicates the negotiations. Although he downplayed whether this issue would derail trade talks entirely, he noted the potential difficulties it posed. As the deadline approaches, the lack of a concrete resolution heightens the uncertainty surrounding U.S.-Canada trade relations, with both sides standing firm amid escalating tensions.
