Donald Trump signed an executive order on Thursday increasing tariffs on Canadian goods imported to the United States from 25% to 35%.
The new import tax rates go into effect on Friday, according to a White House factsheet. The tariff would cover all products not covered by the US-Mexico-Canada trade agreement. Goods transshipped to another country to evade the new tariffs would be subject to a transshipment levy of 40%.
Canada’s prime minister, Mark Carney, said he was “disappointed” by the decision, which comes after months of tariff threats from the Trump administration and escalating trade tensions that have sowed anger in Canada.
US duties and tariffs would heavily affect lumber, steel, aluminum and automobiles, Carney said in a post on X, vowing action to protect Canadian jobs, invest in industrial competitiveness and diversify export markets.
He said Ottawa would continue to negotiate with the US but was also focused on cutting down trade barriers within Canada to create new investment and make Canadians “our own best customer”.
The US decision was announced just hours before a 1 August deadline Trump had imposed on many countries to reach a trade deal with his administration.
The White House said on Thursday evening that Trump had increased tariffs on Canada because the country had failed to act on “the public health crisis caused by fentanyl and illicit drugs flowing across the northern border into the United States”.
In the early hours of Thursday morning, however, Trump had posted on social media that he might not strike a deal with Canada on tariffs as punishment for its decision to recognize the state of Palestine.
“Wow! Canada has just announced that it is backing statehood for Palestine,” Trump wrote on his Truth Social platform. “That will make it very hard for us to make a Trade Deal with them. Oh’ Canada!!!”
Officials in Ottawa have repeatedly noted that only a minuscule amount of fentanyl entering the US originates from Canada. On Thursday, Carney said Canada accounted for just 1% of US fentanyl imports. Still, Canada has taken measures to strengthen the border.
Howard Lutnick, the US commerce secretary, said Trump could reconsider the tariff if Carney “starts turning on the charm and if he takes off his retaliation”.
Carney had said on Wednesday that trade talks between both countries had been constructive but might not conclude by the deadline. He reiterated a deal removing all US tariffs was unlikely.
Carney has to coordinate his reaction with that of the 10 provinces, some of whom want a hard line and others who prefer a softer approach.
William Huggins, an assistant professor in economics at McMaster University in Ontario, told the Guardian that Canada was in a vulnerable economic position, having closely intertwined its economy with its larger neighbor.
“Canada has tried to negotiate sort of forcefully from a position of not acquiescing to every demand, but by the same token, has also realised it’s not in the strongest position to do so … We’ve had to navigate carefully,” said Huggins.
Canada sends around 75% of all its exports south of the border.
Since March, Trump had imposed several tariffs on Canadian goods and energy resources, including a 25% tariff on all goods, excluding potash and energy products, and a separate 10% tariff on energy resources, including potash. There was also a 50% tariff on steel and aluminum imports and a 25% tariff on autos and auto parts.
Carney told reporters in June that if the two countries did not reach a trade deal by 1 August, Canada would probably impose more counter-levies on US exports of steel and aluminum.
