President Trump Announces 35% Tariff on Canadian Imports, Escalating Trade Tensions

On July 11, 2025, President Donald Trump announced a 35% tariff on all Canadian imports, set to take effect on August 1. This decision, communicated through a letter to Canadian Prime Minister Mark Carney and shared on Trump's Truth Social platform, marks a significant escalation in trade tensions between the two neighboring countries.

In his letter, President Trump cited Canada's alleged failure to curb the flow of fentanyl into the United States and its retaliatory tariffs as primary reasons for the new tariff. He warned that any countermeasures by Canada would result in proportional increases to the U.S. tariffs. Prime Minister Carney responded by emphasizing Canada's commitment to combating the fentanyl crisis and expressed a desire to continue working with the U.S. to protect communities in both countries.

The United States and Canada share one of the world's largest trading relationships, governed by the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020. This agreement was designed to facilitate free trade among the three countries. However, recent years have seen escalating trade tensions between the U.S. and Canada. In March 2025, the U.S. imposed tariffs of 25% on Canadian exports and 10% on energy product exports from Canada. In response, Canada announced a robust tariff package, imposing 25% tariffs on $155 billion worth of imported goods from the U.S., beginning with a list of goods worth $30 billion.

President Trump has linked the imposition of tariffs to Canada's alleged role in the flow of fentanyl into the United States. However, data from U.S. Customs and Border Protection indicates that less than 1% of fentanyl seized at or near U.S. land borders in the 2024 fiscal year came from Canada. In response to U.S. concerns, Canada has taken several steps, including unveiling a nearly $950 million plan to tighten security at the U.S.-Canada border and appointing a "Fentanyl Czar" to focus on the issue.

The announcement of the new tariffs has had immediate economic implications. The U.S. dollar gained strength amid global trade tensions, with the Canadian dollar dropping 0.27%. Global markets experienced volatility, with futures slipping and the Canadian dollar hitting a two-week low. Despite the trade tensions, Bitcoin surged to a record high, driven by institutional interest and a crypto-friendly stance by the Trump administration.

The imposition of tariffs has also faced legal scrutiny. On May 28, 2025, the United States Court of International Trade issued its decision in V.O.S. Selections, Inc. v. Trump, ruling that the "Liberation Day" tariffs imposed by former President Donald Trump exceeded the authority granted under the International Emergency Economic Powers Act (IEEPA). The court found that the executive orders authorizing broad-based import tariffs were contrary to law and beyond presidential authority to regulate imports via tariffs.

The escalating trade tensions have led to a significant shift in public sentiment in Canada. A boycott of the United States began in Canada, including both American consumer products and travel to the U.S. Polling indicates that 91% of Canadians want Canada to rely less on the U.S., an option preferred over repairing the relationship. This shift in attitude towards the United States has been described as unprecedented.

As the August 1 implementation date approaches, both nations face mounting pressure to resolve their differences and prevent further economic fallout. The coming weeks will be crucial in determining the future trajectory of U.S.-Canada trade relations.