President Donald Trump announced Thursday that the United States will impose a 35% tariff on all Canadian imports beginning August 1, sharply escalating trade tensions with one of its largest economic partners. The move follows Ottawa's retaliatory actions and revives long-standing disputes over digital taxation, steel quotas, and cross-border narcotics policy.
"Instead of working with the United States, Canada retaliated with its own Tariffs," Trump wrote in a letter to Canadian Prime Minister Mark Carney, which he posted on Truth Social. He added, "Starting August 1, 2025, we will charge Canada a Tariff of 35% on Canadian products sent into the United States, separate from all Sectoral Tariffs."
The announcement comes less than two weeks after Canada rescinded its controversial digital services tax and re-entered trade talks with the U.S., aiming to finalize a bilateral agreement by July 21. Trump, however, cited broader grievances, including fentanyl trafficking, trade imbalances, and what he described as "Tariff and Non-Tariff, Policies and Trade Barriers" from Canada.
"If Canada works with me to stop the flow of Fentanyl, we will, perhaps, consider an adjustment to this letter," Trump added. Ottawa has rejected the claim that significant amounts of fentanyl are entering the U.S. through Canada, calling the assertion "unjustified."
The 35% levy marks a substantial increase from current rates. Canadian goods not covered by the United States-Mexico-Canada Agreement (USMCA) had been subject to a 25% tariff, while energy products carried a 10% tariff. The new duty will apply across all Canadian exports unless exempted under existing sectoral frameworks.
Trump also warned of further escalation if Canada responds with new duties of its own. "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 35% that we charge," he stated. Goods transshipped through third countries to evade tariffs, he added, would also be subject to the full penalty.
The announcement rattled U.S. financial markets. S&P 500 futures fell approximately 0.5%, while Dow Jones Industrial Average futures dropped more than 200 points in after-hours trading. The abrupt policy shift also surprised Canadian negotiators, who said earlier this week that daily talks with U.S. counterparts were ongoing and "constructive."
Canada had implemented its own measures in late June, including steel import quotas and a 50% surcharge on quantities exceeding those quotas. Canadian Finance Minister Chrystia Freeland defended the actions, calling them necessary to protect Canadian industry from unjust U.S. tariffs.
A key flashpoint in the dispute has been Canada's now-rescinded digital services tax, which would have imposed levies on any tech company earning more than $15 million annually from Canadian users. A U.S. tech lobby warned it could have cost American firms up to $3 billion annually had it gone into effect as scheduled on June 30.
Despite efforts to restart talks after Canada dropped the tax, Trump's Thursday post indicates a hardening stance. He ended his letter to Carney with a pointed message: "You will never be disappointed with the United States of America."
