Trump Imposes 35 Percent Tariff on Canadian Imports, Citing Drug Failures and Palestine Recognition

In a dramatic escalation of trade tensions between the United States and Canada, U.S. President Donald Trump on Thursday (July 31, 2025) announced that all goods imported from Canada will now face a 35% tariff, up from the previous rate of 25%. The new tariff takes effect Friday (August 1, 2025), as part of Trump's sweeping policy to reset trade terms with dozens of countries that he accuses of exploiting the United States.

The White House statement, released late Thursday, said the Canadian government had “failed to do more to arrest, seize, detain or otherwise intercept traffickers, criminals at large, and illicit drugs.”

“We gave them time. We gave them chances. But they refused to cooperate,” Trump said in an impromptu press conference.

A Blame Game Over Illicit Drugs

The Trump administration is pointing the finger squarely at Ottawa for what it describes as “glaring inaction” on stemming the flow of illicit drugs and criminal activity across the border.

The executive order released Thursday evening stated:

“Canada must bear responsibility for the continued inflow of synthetic opioids and narcotics into American communities. Our efforts to keep American streets safe cannot be undermined by a neighbour unwilling to act.”

U.S. officials have long claimed that fentanyl, methamphetamines, and other illicit drugs enter the U.S. through ports in British Columbia and Ontario. While Canadian authorities deny systemic negligence, Trump’s move signals a severe diplomatic rift over border security and drug enforcement cooperation.

Political Provocations and Palestine Recognition

Adding fuel to the fire, President Trump also pointed to Canada's foreign policy decisions—specifically its recognition of the State of Palestine—as a reason for soured trade relations.

“They’ve chosen to stand with terrorists over peace, and that’s their right,” Trump said, “but that makes it very hard for us to deal fairly on trade.”

Canada’s Parliament passed a non-binding resolution earlier this week supporting the recognition of Palestinian statehood, a move that drew sharp criticism from U.S. conservative circles and Israeli allies.

Canada Reacts: Ottawa Stands Firm

The Canadian government has not yet issued an official response to the new tariff order, but sources in the Prime Minister’s Office said they are “deeply concerned” and plan to consult with allies and WTO representatives.

Prime Minister Justin Trudeau, earlier this month, had warned that “using trade policy to strong-arm foreign policy decisions is dangerous and unacceptable.”

A senior Canadian diplomat in Washington, requesting anonymity, told media:

“This is not about drugs. It’s about bullying. The President is manufacturing disputes to impose political costs.”

Trump’s 51st State Remark Sparks Uproar

As the trade dispute intensified, Trump again mocked Canada, reviving his “Canada should become America’s 51st state” taunt during a televised rally in Ohio.

“If Canada can’t manage its borders or its foreign policy, maybe it’s time we step in,” he said to loud cheers.

The tongue-in-cheek remark, repeated several times over the last few months, is viewed by Canadian politicians as demeaning and aggressive.

A Broader Tariff Crackdown in Progress

This move is part of Trump’s larger trade overhaul, where he’s using “emergency powers” under the Trade Expansion Act to impose tariffs on nations he accuses of unfair practices, national security risks, or diplomatic hostility.

Earlier the same day, the President unveiled a massive tariff list impacting 69 countries, with rates ranging from 10% to 41%. Canada was already facing a 25% duty, but the sudden hike to 35% has made it one of the hardest-hit nations, second only to China.

Impact on Canadian Exports and U.S. Consumers

Analysts say the tariff hike will severely impact key Canadian industries, including:

• Automobile parts

• Aluminum and steel

• Dairy and agricultural exports

• Forestry and timber

Canadian exports to the U.S. exceed $450 billion annually, with industries now facing immediate pricing and logistics challenges.

Meanwhile, U.S. consumers are likely to see price hikes on basic goods including maple syrup, lumber, paper products, and vehicle components. American manufacturers that rely on Canadian supply chains may also struggle with increased costs and production delays.

Trade Talks Frozen, WTO Action Looms

The sudden tariff increase appears to mark a collapse of ongoing trade negotiations between the two nations. Trump had earlier set August 1 as the final deadline for nations to strike bilateral deals or face tariffs.

Canada, which had been lobbying for exemption, now seems to be gearing up for retaliatory tariffs and formal complaints to the World Trade Organization (WTO).

“Canada will not be intimidated. We will pursue all avenues to protect our trade interests,” said a senior Canadian trade official.

What's Next?

As trade experts assess the damage and forecast retaliatory steps, the US-Canada relationship appears to be at its lowest point in decades.

With Trump expected to announce more trade actions in the coming days and elections looming, both allies and adversaries are bracing for more unpredictable policy swings.

The Upcoming IPOs in this week and coming weeks are BLT Logistics, Bhadora Industries, Highway Infrastructure, Parth Electricals & Engineering, Jyoti Global Plast, Essex Marine, Aaradhya Disposal Industries.

The Current active IPO are Flysbs Aviation, Cash Ur Drive Marketing, Renol Polychem, B.D. Industries (Pune), NSDL, Takyon Networks, Mehul Colours, M&B Engineering, Sri Lotus Developers & Realty.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.