Trump Escalates Economic Aggression: New Tariffs Target Canadian Trade

Department of Research, Studies and International News01-08-2025

In a sharp escalation of Washington’s protectionist agenda, U.S. President Donald Trump has signed a new executive order raising tariffs on Canadian goods from 25% to 35%. This unilateral move, which takes effect immediately, has further strained already fragile trade relations between the neighboring countries and comes against the backdrop of deepening political rifts between Canada and the United States.

The new tariffs apply to all Canadian imports not currently covered by the US-Mexico-Canada Agreement (USMCA), the successor to NAFTA. Additionally, a punitive 40% transshipment levy will be imposed on goods rerouted through third countries in an attempt to sidestep the sanctions. Ottawa has criticized the decision as arbitrary and politically motivated, warning that it risks destabilizing economic cooperation in North America.

Canadian Prime Minister Mark Carney described the decision as “disappointing,” pointing out the potential blow it could deal to sectors such as lumber, steel, aluminum, and automobiles. Carney pledged to take firm action to safeguard Canadian jobs and to broaden the country’s export portfolio, moving away from excessive reliance on the U.S. market.

In a post on social media platform X, Carney stated: “We are committed to reducing internal trade barriers and investing in Canadian industrial capacity to make Canadians our own best customer.” Ottawa also confirmed that it remains open to negotiations but emphasized that it would not compromise its national or diplomatic principles for economic concessions.

Although the White House formally justified the tariffs by citing the alleged “public health crisis” of fentanyl and illicit drug flows from Canada, this explanation has been met with skepticism. According to Carney, Canadian-sourced fentanyl accounts for only about 1% of the total entering the United States, an insignificant figure by any international metric. Nonetheless, Canada has continued to tighten its border security in recent months.

More revealing, however, was a statement made by Trump earlier on his social media platform, Truth Social, in which he linked the trade penalties to Canada’s recent recognition of Palestinian statehood. “Wow! Canada has just announced that it is backing statehood for Palestine,” Trump wrote. “That will make it very hard for us to make a Trade Deal with them. Oh, Canada!!!” The statement underscores the increasing weaponization of trade policy by the U.S. to enforce its foreign policy agenda, especially when allies act independently on issues sensitive to Washington and Tel Aviv.

U.S. Commerce Secretary Howard Lutnick hinted that the tariffs could be lifted if Carney adopted a more conciliatory tone and abandoned retaliatory plans. However, Carney had already indicated that a full rollback of U.S. tariffs was unlikely, even though discussions between both countries had been ongoing.

This latest measure is part of a series of aggressive tariffs Trump began imposing in March. In addition to a general 25% levy on most Canadian goods, the U.S. has introduced a separate 10% tax specifically targeting Canadian energy exports. Steel and aluminum face a steep 50% duty, while the automotive sector is being hit with a 25% import tax.

Canada, which sends approximately 75% of its exports to the U.S., finds itself in an economically vulnerable position. Experts warn that while Ottawa has attempted to negotiate with resolve, its tightly interwoven economic dependence on its southern neighbor limits its leverage. William Huggins, an economics professor at McMaster University, noted that “Canada has had to tread carefully, balancing resistance with the reality that it lacks equal weight at the negotiating table.”

As the 1 August deadline set by Trump for a new trade agreement approaches without resolution, Canada is expected to announce a fresh round of countermeasures targeting U.S. exports. The outcome of this trade standoff could significantly reshape North American economic dynamics, especially as Ottawa begins to look eastward, toward partners like China, Iran, and the Global South, for more balanced, respectful cooperation untainted by hegemonic pressure.