Trump raises tariff on Canadian goods to 35%, escalating US-Canada trade tensions
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U.S. President Donald Trump has signed an executive order increasing tariffs on Canadian imports from 25% to 35% on all products not covered by the U.S.-Mexico-Canada trade agreement, effective August 1, 2025, according to a White House announcement early Thursday.Goods that are routed through a third country to avoid the new tariffs will face a transshipment levy of 40%, as specified in a White House fact sheetThe White House justified the tariff hike by citing what it called Canada 's 'continued inaction and retaliation' in bilateral disputes. In response, President Trump asserted, 'We have no choice but to ensure fairness and the protection of American industries,' signaling possible further escalation if Canada retaliates.This marks the highest broad-based tariff the U.S. has levied on Canadian goods in modern history. A previous rate of 25% had already been in effect across a range of products, with sector-specific tariffs as high as 50% on aluminum and steel. The 35% duty now applies broadly to Canadian export s—affecting industries from automobiles and agriculture to metals—which collectively account for about 75% of Canada's export market.The announcement also coincides with contentious diplomatic developments. On the eve of the deadline, Canadian Prime Minister Mark Carney declared Canada's intent to recognize Palestine as a sovereign state, pending elections and specific criteria.President Trump publicly linked this decision to the trade dispute, writing on his Truth Social account, 'That make it hard for [us] to make trade deal with them,' and firmly establishing an August 1 deadline for new tariffs if no agreement was reached.In 2024, Canada was the second-largest U.S. trading partner, with $761.8 billion in two-way trade. Economists caution that the new tariffs could destabilize supply chains already strained by previous rounds of duties and post-pandemic disruptions, triggering inflationary pressures and threatening jobs on both sides of the border.As of Friday morning, Canada has not announced countermeasures but government officials are reportedly considering a range of responses. The Trudeau administration, ousted from office in 2024, had previously favored strategic retaliatory tariffs and appeals through the World Trade Organization. With little immediate prospect for resolution, economists and trade attorneys expect a turbulent period for U.S.-Canada commerce and ongoing uncertainty for multinational businesses.
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