Trump increases tariff on Canada to 35% from 25%, cites fentanyl concern

WASHINGTON/TORONTO - US President Donald Trump on July 31 signed an executive order increasing tariffs on Canadian goods to 35 per cent from 25 per cent on all products not covered by the US-Mexico-Canada (USMCA) trade agreement, the White House said.

Goods transshipped to another country to evade the new tariffs will be subject to a transshipment levy of 40 per cent, according to a White House fact sheet.

The move – which Washington linked in part to what it said was Canada’s failure to stop fentanyl smuggling – is the latest blow in a months-long tariff war that Mr Trump initiated shortly after taking power.

The announcement blaming Canada’s “continued inaction and retaliation” comes after Mr Trump said Canadian Prime Minister Mark Carney reached out ahead of an Aug 1 tariff deadline, but no conversations between the two took place.

Mr Trump had said any country failing to strike a deal with the US before Aug 1 will be subjected to higher tariffs imposed on goods.

Mr Carney on Aug 1 said he was disappointed by Mr Trump’s decision.

US duties and tariffs will heavily affect lumber, steel, aluminium and cars, Mr Carney said in a post on social media platform X, vowing action to protect Canadian jobs, buy its goods, invest in industrial competitiveness and diversify export markets.

“While we will continue to negotiate with the United States on our trading relationship, the Canadian government is laser focused on what we can control: building Canada strong.”

To justify its step, the US has cited the cross-border flow of fentanyl, even though Canada accounts for just 1 per cent of US fentanyl imports and has been working intensively to further reduce the volumes, Mr Carney added.

Premier Doug Ford of Ontario, which accounts for around 40 per cent of Canadian gross domestic product and is the country’s industrial heartland, demanded Ottawa impose a 50 per cent counter tariff on imports of US steel and aluminium.

“Canada shouldn’t settle for anything less than the right deal. Now is not the time to roll over. We need to stand our ground,” he said in a post on X.

Earlier on July 31, Mr Trump said it would be “very hard” for the US and Canada to strike a deal after

Ottawa moved towards recognising Palestinian statehood.

He said later on July 31, however, that he did not view the move as “a dealbreaker” in trade talks.

“Well, they have to pay a fair rate – that’s all. It’s very simple. They have been charging very, very high tariffs to our farmers, some over 200 per cent, and they’ve been treating our farmers very badly,” Mr Trump said when asked about negotiations.

He added that while he loves Canada, it has treated the US “very badly” for years.

US Commerce Secretary Howard Lutnick said Mr Trump could reconsider the tariff if Mr Carney “starts turning on the charm and if he takes off his retaliation”.

Earlier on July 31, Mr Trump agreed to give Mexico a 90-day window to work towards a deal, allowing it to avoid a 30 per cent tariff that he threatened to impose by Aug 1.

Mexico will still have to pay a 25 per cent duty on US-bound exports that are non-USMCA-compliant, a tariff that Mr Trump has linked to demands that Mexico do more to curb drug and human smuggling.

Canada sends around 75 per cent of all its exports south of the border and is vulnerable to US trade action.

The economy has shown surprising resilience in the face of tariffs and is expected to avoid recession, economists say.

About 90 per cent of Canadian exports to the US in May were exempt under the USMCA. The compliance level has shot up dramatically in the last few months, while some companies have diversified exports to avoid tariffs.

Canadian government data shows exports to the US dropped by 10 percentage points to 68 per cent of total exports between May 2024 and May 2025, focused on manufacturing products such as cars and parts, and products made with steel and aluminium.

Mr Carney told reporters in June that if the two countries do not reach a trade deal by Aug 1, Canada would likely impose more counter tariffs on US exports of steel and aluminium. REUTERS