Trump hikes Canada tariffs to 35% amid fentanyl and trade disputes

The U.S. government has escalated its trade pressure by raising tariffs on Canadian goods not covered by the U.S.-Mexico-Canada Agreement (USMCA) from 25 percent to 35 percent, effective August 1, 2025. This move is part of a broader strategy by President Donald Trump to address what the administration describes as inadequate cooperation from Canada on fentanyl control and its own tariff policies that affect U.S. agricultural exports [1]. The decision is also framed as a warning to other countries, with 69 nations now facing tariffs ranging from 10 to 40 percent [2].

To provide temporary relief, a grace period was introduced: goods loaded by August 7 or arriving by October 5 will not be subject to the new 35 percent rate. Additionally, the administration announced a 40 percent tariff on goods transshipped through third countries to avoid duties, signaling a firm stance against evasion and hinting at deeper enforcement measures [3]. The unilateral implementation of the tariffs, done without prior consultation with Canadian Prime Minister Mark Carney despite diplomatic outreach, highlights a high-stakes approach to trade negotiations that may complicate future discussions with other partners [4].

Markets reacted with minimal volatility in the five hours following the announcement. Asian equity futures dipped slightly, suggesting a degree of normalization around Trump’s trade policies. However, uncertainty remains, particularly regarding the administration’s impending clarification of “rules of origin” for Canadian goods, which could trigger further trade penalties [5]. The administration’s legal basis for the tariffs relies on the International Emergency Economic Powers Act, a move that has already drawn federal lawsuits questioning its legality [6].

Mexico was granted a 90-day reprieve on a proposed 30 percent tariff increase on non-USMCA goods after a direct call between Trump and President Claudia Sheinbaum. However, existing tariffs on steel, aluminum, and automobiles remain unchanged [7]. The tariffs imposed on other countries vary significantly, ranging from 10 percent to 40 percent, reflecting the diverse trade policies and diplomatic relations with the U.S. [8].

The administration has positioned these tariffs as necessary for reversing trade imbalances and boosting domestic manufacturing. Yet, the strategy is seen as legally precarious and diplomatically challenging, given the scale of the affected countries and the lack of prior consultation. With a key deadline set for August 12 for potential negotiations with China, the tariffs are also being leveraged as bargaining tools in broader international trade discussions [9].

Sources:

[1] The – [https://www.nytimes.com/live/2025/07/31/business/tariffs-trump-trade](https://www.nytimes.com/live/2025/07/31/business/tariffs-trump-trade)

[2] Yahoo – [https://finance.yahoo.com/news/live/trump-tariffs-live-updates-trump-outlines-sweeping-new-tariffs-for-dozens-of-trade-partners-200619934.html](https://finance.yahoo.com/news/live/trump-tariffs-live-updates-trump-outlines-sweeping-new-tariffs-for-dozens-of-trade-partners-200619934.html)

[3] MSN – [https://www.msn.com/en-in/money/topstories/trump-increases-tariff-on-canada-to-35-from-25-cites-fentanyl-ahead-of-august-1-deadline/ar-AA1JGvh1?cvid=7F0BEAAC66A04777AFB62979438C5B05&ocid=hpmsn](https://www.msn.com/en-in/money/topstories/trump-increases-tariff-on-canada-to-35-from-25-cites-fentanyl-ahead-of-august-1-deadline/ar-AA1JGvh1?cvid=7F0BEAAC66A04777AFB62979438C5B05&ocid=hpmsn)

[4] WTOP – [https://wtop.com/australia/2025/08/the-latest-us-trade-partners-around-the-world-react-to-trumps-new-tariffs/](https://wtop.com/australia/2025/08/the-latest-us-trade-partners-around-the-world-react-to-trumps-new-tariffs/)

[5] Coinfomania – [https://coinfomania.com/canada-faces-35-percent-tariff-as-trump-expands-trade-pressure/](https://coinfomania.com/canada-faces-35-percent-tariff-as-trump-expands-trade-pressure/)

[6] The – [https://thehill.com/homenews/administration/5429258-donald-trump-canada-palestinian-state/](https://thehill.com/homenews/administration/5429258-donald-trump-canada-palestinian-state/)

[7] Bangkok Post – [https://www.bangkokpost.com/business/general/3079628/trump-unveils-slew-of-new-tariffs-punishes-canada](https://www.bangkokpost.com/business/general/3079628/trump-unveils-slew-of-new-tariffs-punishes-canada)

[8] Yahoo.co – [https://uk.finance.yahoo.com/news/trump-hikes-tariffs-on-canada-to-35-announces-rates-from-10-to-40-for-dozens-of-countries-000338109.html](https://uk.finance.yahoo.com/news/trump-hikes-tariffs-on-canada-to-35-announces-rates-from-10-to-40-for-dozens-of-countries-000338109.html)