The countdown is on for U.S. President Donald Trump’s ultimatum to escalate tariffs on Canadian imports to the United States from 25 percent to 35 percent. This threat, initially set at a 25 percent rate shortly after Trump’s inauguration, has now been given an August 1 deadline for Canada to secure a trade agreement to avoid the tariff hike.
Here is a quick overview of the crucial tariff developments concerning Canada:
On February 1, Trump issued an executive order imposing tariffs on Canadian exports to the U.S. at a rate of 25 percent for most products, with exceptions such as energy, critical minerals, and potash facing a 10 percent rate. The justification for these tariffs was to combat the influx of illicit drugs, particularly fentanyl, across the northern border. The tariffs officially took effect on March 4.
By March 6, just two days after the initial tariffs took effect, Trump amended the executive order to exempt products complying with the terms of the Canada-U.S.-Mexico Agreement (CUSMA). This exemption covered almost 90 percent of Canadian exports to the U.S., allowing the majority of products to enter the U.S. without facing tariffs.
In late April, Trump scaled back his threat of imposing a 25 percent tariff on foreign-made automobiles and auto parts to target only non-CUSMA-compliant parts and the non-U.S. portion of assembled vehicles. Despite this adjustment, the tariffs impacted Canada’s auto industry and affected North American automakers’ profits.
In early May, shortly after winning a minority election, Prime Minister Mark Carney met with Trump at the White House to advocate for tariff removal. However, Trump showed no indication of revising his stance on the tariffs during the meeting.
Separately, in June, Trump doubled the tariff on steel and aluminum imports from all nations to 50 percent, with Canada being the primary supplier of these products to the U.S.
Fast forward to July, Trump reiterated his threat to increase the tariff on Canadian goods to 35 percent effective August 1, linking this decision to cooperation in curbing the flow of fentanyl. Goods compliant with CUSMA would remain tariff-exempt even with the proposed rate increase.
As the tariff deadline approached, negotiations between Canada and the U.S. faced skepticism on reaching a deal, with Trump expressing doubts about successful negotiations with Canada specifically. Despite ongoing trade talks, the likelihood of a deal by the August 1 deadline remained uncertain.