In a major escalation of trade tensions between the United States and Canada, former President Donald Trump, currently in campaign mode, has announced a 35% tariff on all Canadian imports starting August 1, 2025.

This move has shocked Canadian officials and rattled global markets, with fears of a renewed trade war reminiscent of earlier confrontations during Trump’s first term. Trump also signalled plans for 15-20% tariffs on other major trading partners unless they address what he called “unfair trade imbalances.”

The Announcement

Trump delivered the announcement after a phone call with Canadian Prime Minister Mark Carney, in which he informed Carney that the 35% tariff would go into effect on August 1, 2025, and warned it could rise even further if Canada retaliates.

“We will not be taken advantage of anymore,” Trump declared at a campaign event in Ohio, framing the tariffs as a defence of American workers and industries.

Canadian Reaction

Prime Minister Carney, only recently sworn in, expressed deep concern over the abrupt and unilateral decision. In a press briefing, Carney called it a “serious setback” for North American trade relations and vowed to consult allies and trade partners about next steps.

Canadian exporters and trade groups warned of:

• Higher costs for consumers on both sides of the border.

• Potential layoffs in export-dependent sectors.

• Disruption to integrated supply chains, especially in automotive and agriculture.

Background on U.S.-Canada Trade

The U.S. and Canada share one of the world’s largest trading relationships, worth over $700 billion annually.

Key points:

• Canada is the largest U.S. trading partner for goods.

• Integrated supply chains span the automotive, energy, agriculture, and technology sectors.

• Previous Trump tariffs (on steel and aluminium) strained relations, but had been rolled back after negotiations.

The new 35% tariff threatens to undo years of trade liberalisation under the USMCA (United States-Mexico-Canada Agreement), which had replaced NAFTA in 2020.

Trump’s Tariff Threat to Others

Alongside the Canada move, Trump threatened to impose 15-20% tariffs on other major trading partners, including the European Union, China, Japan, and South Korea, if they do not reduce what he called “massive trade deficits” with the United States.

He specifically singled out:

• German automobiles.

• Chinese manufactured goods.

• Japanese electronics.

• South Korean steel.

“We are going to balance our trade one way or another,” Trump said, drawing cheers from supporters but warnings from economists.

Motivations and Political Context

Trump’s tariff-heavy approach is widely seen as an effort to:

• Appeal to Rust Belt voters, who blame globalisation for lost manufacturing jobs.

• Differentiate himself from President Biden and other rivals by projecting a tough stance on trade.

• Leverage negotiations with other countries by threatening economic pain.

Analysts note that Trump’s messaging has found resonance in some parts of the U.S., especially among workers in traditional industries.

Economic Impact on Canada

Canadian economists predict significant disruptions if the 35% tariff is implemented:

• Higher costs for Canadian producers exporting to the U.S.

• Potential loss of competitiveness in key sectors like automotive parts, lumber, and agriculture.

• Risk of economic slowdown in provinces heavily reliant on U.S. trade.

Businesses are also worried about supply chain confusion, given that many components cross the border multiple times before final assembly.

Possible Canadian Responses

Canada faces a tough choice:

• Retaliate with counter-tariffs on U.S. goods, risking escalation.

• Seek negotiated settlement to avoid harming both economies.

• Appeal to international trade bodies like the WTO or invoke USMCA dispute resolution mechanisms.

Past experience suggests Ottawa will weigh retaliatory measures carefully to avoid hurting Canadian consumers and exporters even more.

Global Repercussions

Trump’s threats to extend tariffs globally have sparked unease among U.S. allies and trading partners:

• European Union officials condemned the “America First” approach, warning of trade retaliation.

• Asian economies expressed concern over supply chain disruptions and higher costs.

• Global markets reacted with volatility as investors braced for increased protectionism.

Historical Context

Trump’s first term saw:

• Tariffs on Chinese goods, sparking a trade war that hurt farmers and manufacturers.

• Steel and aluminium tariffs on allies, including Canada, Mexico, and the EU.

• Renegotiation of NAFTA into USMCA after tense negotiations.

While those disputes were eventually managed or resolved, the new moves suggest Trump is prepared to reignite trade wars to achieve his goals.

U.S. Domestic Reaction

U.S. business groups and economists largely criticised the move:

• The U.S. Chamber of Commerce warned of higher consumer prices.

• Farm groups feared Canadian retaliation on U.S. agricultural exports.

• Automotive industry leaders cautioned that cross-border supply chains would suffer.

However, Trump’s base — particularly in manufacturing-heavy states — cheered the tariffs as defending American jobs.

Risks for Trump

While politically popular in some quarters, Trump’s tariff policy carries risks:

• Potential inflation if import costs rise.

• Disruption to U.S. companies reliant on Canadian suppliers.

• Possible slowdown in U.S. manufacturing if Canada retaliates.

• Damage to U.S. global reputation as a stable trade partner.

Economists argue that such tariffs often backfire by harming domestic consumers and industries.

Trade Experts’ Views

Trade experts say Trump’s move is:

• A negotiating tactic to force Canada and others to make concessions.

• Risky because Canada is likely to retaliate, escalating tensions.

• Potentially damaging to North American economic integration built over decades.

Many urge both sides to return to the negotiating table to avoid mutual harm.

Impact on USMCA

The tariffs threaten the stability of USMCA, the trade agreement Trump himself championed as a replacement for NAFTA.

Key points of concern:

• Tariffs violate USMCA’s spirit of reduced barriers.

• Dispute resolution mechanisms could be triggered.

• Long-term investor confidence in North America could suffer.

The Way Forward

For now, Canada has not announced formal retaliation, but consultations are underway.
Possible paths include:

• Negotiated tariff exemptions or reductions.

• Targeted counter-tariffs on politically sensitive U.S. exports.

• Invoking USMCA mechanisms for dispute resolution.

Trump, meanwhile, appears ready to double down, threatening even higher rates if Canada resists.

Conclusion

The announcement of a 35% tariff on Canadian imports marks a dramatic escalation in North American trade tensions, with profound implications for bilateral relations, supply chains, and global trade stability.

As Trump signals an even broader tariff offensive against other countries, the world braces for a return to protectionism that could disrupt economies and test diplomatic ties.

For Canada and the United States — long the closest of trading partners — the coming weeks will be crucial in deciding whether this trade war can be averted or if both sides will enter a new era of confrontation.

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