Donald Trump has further escalated trade hostilities toward Canada. He threatened to slap a terrible 35% tariff on imports coming from that country, a shock treatment that could severely damage both countries’ economies. The U.S. ex-president has at different points in his presidency expressed his desire to see Canada annexed as the 51st state. Canada has repeatedly rejected this ask. As the two countries continue to navigate these stormy trade seas, the stakes are perhaps higher than ever before.
That’s because in 2022, Canada bought a record $349 billion of our exports. Together, this eye-popping number in fact put Canada as the #1 purchaser of American exports. On the flip side, Canada imported $413 billion worth of goods from the United States, making it the United States’ third-largest source of foreign imports. Perhaps that’s why Trump’s recent tariff threat sent shivers through Canadian officials. Opposition leaders worry about what this will do to bilateral relations.
Trade Imbalances and Tariffs
One of the biggest ingredients stoking the fire of Trump’s tariff threat is Canada’s import tariffs on U.S. dairy exports. He claims these tariffs to be about 250%. Trump has repeatedly stated, “Canada has been ripping us off for years on lumber and on dairy products.” Canada responded to harmful U.S. auto tariffs by enacting a 25% tariff on U.S.-made cars. This tariff would be on all vehicles that fall short of USMCA’s draconian localization rules.
More importantly, Trump has directly tied these punishing tariffs to Canadian trade practices, claiming that their practices have made it an unfair trade environment. “If Canada works with me to stop the flow of Fentanyl, we will, perhaps, consider an adjustment to this letter,” he remarked, indicating that the tariffs could be modified depending on future relations.
In retaliation to Trump’s steel and aluminum tariffs, Canada previously enacted tariffs on billions of dollars’ worth of U.S. goods. The tit-for-tat exchange between the two countries highlights the fragility of their trade relationship and risks of more escalation ahead.
Fentanyl Concerns and Border Measures
The problem of fentanyl trafficking further muddies the waters of US-Canadian discourse. Yet according to U.S. federal statistics, Canada is the source of only a minuscule portion of illegal fentanyl flowing into the U.S. During the 2024 fiscal year, authorities confiscated just 43 pounds at the northern border of a jaw-dropping 21,889 pounds — or about 0.2%. That fentanyl crisis Canadian Prime Minister Justin Trudeau is taking the crisis head on. He recently appointed a Fentanyl Czar and released a new border plan to stop fentanyl and other narcotics coming into our country.
Mark Carney, Prime Minister Trudeau’s representative, emphasized Canada’s commitment to addressing the opioid crisis: “We are committed to continuing to work with the United States to save lives and protect communities in both our countries.” Even with all these efforts, Trump has used fentanyl in trade negotiations to his advantage. He calls for action against the drug to prevent its influx into the U.S.
Political Reactions and Future Negotiations
The political landscape in Canada has responded to Trump’s tariff threats in like fashion. Pierre Poilievre, Canada’s Conservative opposition leader, condemned the proposed measures as “another unjustified attack on Canada’s economy.” He stressed that Canada has always been a reliable partner and friend to the United States, stating, “These tariffs will damage both our countries.”
As negotiations stall, the two countries both want to settle their differences by July 21. These negotiations are being hampered on both sides as each country continues to deal with the specter of tariffs and thorny issues such as fentanyl trafficking. During these discussions, Carney claimed that Canada would protect their workers and businesses from meritless attacks.
“Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses.” – Mark Carney
