United States President Donald Trump has introduced that he’ll increase import tariffs on most Canadian items to 35 percent, despite the fact that Canada has agreed to rescind its deliberate digital services tax because the US demanded.
This comes as Trump sends “tariff letters” to a bunch of nations this week, notifying them of deliberate US commerce levies to take impact on August 1 if commerce offers aren’t struck earlier than then.
What has Trump introduced for Canada?
In late June, Trump threatened to end trade talks with Canada over its plans to push forward with a brand new digital companies tax, which might hit US expertise corporations financially. The US president stated it was “a direct and blatant assault on our Nation”. Canada rapidly agreed to withdraw the tax.
However, in a letter launched on his social media platform on Thursday this week, Trump nonetheless informed Canadian Prime Minister Mark Carney {that a} new 35 % tariff – a rise from the 25 percent charge initially imposed in March – would go into impact on August 1 and would rise if Canada retaliated with new tariffs of its personal.
What do the US and Canada commerce?
Canada is America’s second-largest buying and selling companion, after Mexico. In 2024, Canada purchased $349.4bn of US items and exported $412.7bn, in response to US Census Bureau knowledge. The upshot is that Canada runs a $63.3bn commerce surplus with the US.
Canada’s key exports to the US embrace oil and mineral fuels, vehicles and auto components, in addition to industrial equipment and nuclear reactors. Alternatively, it imports massive quantities of transportation tools, industrial chemical compounds and manufacturing expertise from the US.
What US tariffs does Canada already face?
In his inaugural tackle after taking up the US presidency on January 20, Trump introduced a 25 percent tariff on all Canadian items and a ten % tariff on Canadian vitality sources, claiming that Canada had a “rising footprint” within the manufacturing of fentanyl, a extremely addictive and infrequently lethal opioid drug.
He claimed Canada was not doing sufficient to stop the stream of fentanyl into the US.
These tariffs have been paused for 30 days following assurances from Canada that applicable motion could be taken to curb the stream of fentanyl, however have been then reimposed in early March after Trump declared that Canada had didn’t do sufficient. They’re now rising once more, to 35 %.
Canada, the most important overseas provider of metal and aluminium to the US, was additionally badly hit by Trump’s separate 25 % tariffs on metal and aluminium, which he imposed globally in March. Trump doubled that for all nations to 50 % in June, saying the measure would shield and bolster the US metals sector.
In March, Trump additionally introduced a separate 25 % tariff on imported cars and car parts. He stated this might “take again” cash from overseas nations which have been “taking our jobs” and “our wealth”.
Sectoral tariffs, on issues like vehicles and industrial metals, are separate from country-wide levies.
For his half, Canadian Prime Minister Mark Carney described the auto tax transfer as a “direct assault” on Canadian employees.
Till the beginning of Trump’s second time period as US president in January this 12 months, Canada had loved years of free commerce relations with the US. It’s understood that Mark Carney remains to be looking for methods to fulfill Trump so {that a} 2018 free-trade deal between the US, Mexico and Canada (USMCA) – agreed throughout Trump’s first time period in workplace – could be put again on observe.
USMCA got here into power on July 1, 2020, changing the 1994 North American Free Commerce Settlement (NAFTA). It’s presupposed to be reviewed each six years, and since Trump returned to workplace, it has been blighted by disputes and non-compliance points. Some commerce commentators have steered the settlement received’t be prolonged subsequent summer time.
Trump’s Canada announcement this week additionally got here after officers in Ottawa denounced yet one more separate US plan to impose a 50 percent import tariff on copper earlier this week. Canada is among the largest suppliers of the metallic to the US.
Why is Trump levying all these tariffs on Canada?
The Trump administration claims its tariffs on Canada are designed to power Ottawa to crack down on fentanyl smuggling into the US, regardless of solely a modest stream of the drug over the border. Trump has additionally expressed frustration along with his nation’s commerce deficit with Canada, which largely displays oil purchases.
“I have to point out that the stream of Fentanyl is hardly the one problem we’ve with Canada, which has many Tariff, and Non-Tariff, Insurance policies and Commerce Boundaries,” Trump wrote within the letter.
Apart from greater than 20 related letters to different US commerce companions to date this week, Trump says he’ll quickly announce new tariffs for the European Union, too. As with Canada’s letter, Trump has promised to implement these new import levies from August 1.
Do Trump’s justifications for tariffs on Canada maintain water?
Canadian authorities knowledge exhibits that less than 0.1 percent of all seizures of fentanyl getting into the US, from 2022-2024, have been made on the Canadian border.
Nearly all of relaxation was confiscated on the US border with Mexico. Carney has additionally publicly committed to “cease the scourge of fentanyl” in North America, and stated his authorities needs to work alongside the US to guard communities in each nations.
All through the present commerce negotiations with the US, the Canadian authorities has steadfastly defended our employees and companies. We are going to proceed to take action as we work in direction of the revised deadline of August 1.
Canada has made important progress to cease the scourge…
— Mark Carney (@MarkJCarney) July 11, 2025
As a substitute, in his first speech as prime minister, Carney stated he believed that “the People need our sources, our water, our land, our nation”.
He has needed to push again on Trump’s taunts of creating Canada the “51st state of America”. Certainly, Carney predicated his latest election win on the concept Canada ought to preserve its “elbows up”, as he put it.
Throughout a gathering with Trump on the White Home in Washington, DC, in Could, Carney stated: “Having met with the house owners of Canada over the course of the marketing campaign these final a number of months, it’s not on the market – received’t be on the market – ever.”
In latest months, Carney has additionally been strengthening ties with the UK and the EU in a bid to diversify its exports from the US.
Hours earlier than Trump’s newest letter, Carney posted a picture of himself with British Prime Minister Keir Starmer on X, saying, “Within the face of worldwide commerce challenges, the world is popping to dependable financial companions like Canada.”
Within the face of worldwide commerce challenges, the world is popping to dependable financial companions like Canada. pic.twitter.com/KlsXJdhCSk
— Mark Carney (@MarkJCarney) July 10, 2025
What was the Canadian digital tax row about?
The US is residence to a number of the world’s largest expertise corporations, together with Apple, Alphabet/Google, Amazon and Meta. A brand new 3 % digital companies tax to be levied on tech corporations deriving revenues from Canadian customers, because of take impact in late June this 12 months, might have price these corporations $2bn in further taxes.
Trump referred to as the brand new tax “a direct and blatant assault on our Nation” in a Fact Social put up in June. He added that the US could be “terminating ALL discussions on Commerce with Canada, efficient instantly”.
A number of days after Trump suspended commerce negotiations, Carney rescinded the tax in an effort to renew talks.
As such, Trump’s newest tariff letter to Carney has come despite what many had seen as a thawing of relations between the 2 leaders, who stay locked in commerce negotiations.
How has Trump handled different nations?
To date this week, Trump has despatched tariff letters to 23 heads of state, notifying them of recent commerce tariffs. On Wednesday, he informed Brazil that he plans to impose a 50 percent tariff due to its “witch-hunt” towards former President Jair Bolsonaro.
Bolsonaro, who’s accused of plotting a coup, refused to publicly concede the 2022 presidential election, which he misplaced to present President Luiz Inacio “Lula” da Silva. Trump was equally indicted in relation to efforts to overturn his personal election loss in 2020.
Elsewhere, Trump’s tariff letters mirror his administration’s failure to finalise dozens of commerce agreements that he claimed could be straightforward to barter. Shortly after unveiling his April 2 “Liberation Day” commerce levies, Trump introduced a 90-day pause to attempt to work out these agreements.
However on Monday, the president was pressured to increase this pause once more till August 1. For probably the most half, Trump says he’s making an attempt to rebalance massive buying and selling deficits, whereby the US imports greater than it exports. Nonetheless, some focused nations – together with Brazil – have commerce imbalances within the US’s favour somewhat than their very own.
Apart from Brazil, recipients of tariff letters on Wednesday included the Philippines, Moldova, Sri Lanka, Brunei, Libya, Algeria and Iraq. They have been notified of tariffs as excessive as 30 %.
The charges Trump stated could be imposed on Sri Lanka, Moldova, Iraq and Libya have been decrease than these he initially introduced in early April. Tariffs on items from the Philippines and Brunei have been larger. The speed for items from Algeria remained the identical.
On Monday, he notified Japan, South Korea and a dozen different economies of tariffs starting from 25 % to 40 %.
In an interview with NBC Information on Thursday, Trump stated: “We’re simply going to say all the remaining nations are going to pay, whether or not it’s 20 % or 15 %. We’ll work that out now.”
At present, the worldwide baseline minimal tariff charge for practically all US buying and selling companions is 10 %.
How have markets reacted to the tariff letters?
Whereas the White Home unfurled a stream of tariff bulletins this week, monetary markets have usually shrugged off Trump’s threats. The S&P 500 – the inventory market index monitoring the efficiency of the five hundred largest corporations within the US – and the tech-heavy Nasdaq Composite each closed at report highs on Thursday.
Consultants say that latest features within the S&P 500 counsel many buyers assume that Trump will finally again down on his tariff will increase.
Financiers have established a reputation for the president’s coverage flip-flopping – it’s referred to as TACO: “Trump At all times Chickens Out”. Washington, so the idea goes, doesn’t have a excessive tolerance for financial strain and can again off when tariffs trigger ache.
