President Donald Trump said in a Thursday letter that he will raise taxes on many imported goods from Canada to 35%, deepening a rift between two North American countries that have suffered a debilitating blow to their decades-old alliance.
The letter to Canadian Prime Minister Mark Carney is an aggressive increase to the top 25% tariff rates that Trump first imposed in March after months of threats. Trump’s tariffs were allegedly in an effort to get Canada to crack down on fentanyl smuggling despite the relatively modest trafficking in the drug from that country. Trump has also expressed frustration with a trade deficit with Canada that largely reflects oil purchases by America.
“I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers,” Trump wrote in the letter.
The higher rates would go into effect Aug. 1, creating a tense series of weeks ahead for the global economy as recent gains in the S&P 500 stock index suggest many investors think Trump will ultimately back down on the increases.
While multiple countries have received tariff letters this week, Canada — America’s second largest trading partner after Mexico — has become something of a foil to Trump. It has imposed retaliatory tariffs on U.S. Goods and pushed back on the president’s taunts of making Canada the 51st state. Mexico has also faced 25% tariffs because of fentanyl, yet it has not faced the same public pressure from Trump.
Carney was elected prime minister in April on the argument that Canadians should keep their “elbows up.” He has responded by distancing Canada from its intertwined relationship with the U.S., seeking to strengthen its links with the European Union and the United Kingdom.
Hours before Trump’s letter, Carney posted on X a picture of himself with British Prime Minister Keir Starmer, saying, “In the face of global trade challenges, the world is turning to reliable economic partners like Canada.” Implied in his statement was that the U.S. Has become unreliable because of Trump’s haphazard tariff regime, which has gone through aggressive threats and reversals.
When Carney went to the White House in May, the public portion of their meeting was cordial. But Trump said there was nothing the Canadian leader could tell him to remove the tariffs.
“Just the way it is,” Trump said at the time.
Carney indicated he would be willing to be patient in pursuing talks on trade.
“There are much bigger forces involved,” the Canadian leader said. “And this will take some time and some discussions.”
Trump has sent a series of tariff letters to 23 countries so far. Those form letters became increasingly personal with Canada as well as a Wednesday note that put a 50% tariff on Brazil for the ongoing trial of its former president, Jair Bolsonaro, for trying to stay in office after his 2022 election loss. Trump was similarly indicted for his efforts to overturn his 2020 election loss.
The letters reflect the inability of Trump to finalize the dozens of trade frameworks that he claimed would be easy to negotiate. Shortly after unveiling his April 2 “Liberation Day” tariffs, a financial market selloff caused Trump to announce a 90-day negotiating period during which a 10% baseline tariff would be charged on most imported goods.
But Trump has indicated that the 10% tariff rates are largely disappearing as he resets the rates with his letters.
“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%,” Trump said in a phone interview with NBC News.
So far, Trump has announced trade frameworks with the U.K. And Vietnam, as well as a separate deal with China in order to enable continued trade talks. Trump jacked up import taxes on Chinese goods to as much as 145%, but after talks Trump has said China faces total tariffs of 55%.
In June, Trump said he was suspending trade talks with Canada over its plans to continue its digital services tax, which would hit U.S. Technology companies. A few days later, talks resumed when Carney rescinded the tax.
Under the current tariff structure, the 2020 United States Mexico Canada Agreement has protected eligible goods from Trump’s tariffs. But a review of the pact is scheduled for 2026.
