US President Donald Trump has announced a 35% tariff on all Canadian imports, effective 1 August, a move that could disrupt one of the United States' most significant trade relationships.
The decision was outlined in a letter posted to Trump's Truth Social account, in which he issued a decisive ultimatum: Canada must increase efforts to limit the flow of fentanyl into the US or face sweeping trade penalties.
'If Canada works with me to stop the flow of fentanyl,' Trump stated, 'I will consider an adjustment to this letter.'
Addressed to Canadian Prime Minister Mark Carney, the communication has generated alarm among trade analysts and policy experts.
While the opioid crisis remains a major concern in the United States, US Customs and Border Protection data indicate that just 19 kg (43 lb) of fentanyl were seized at the northern border in 2024, compared to over 9.6 tonnes (21,100 lb) interdicted at the southern border with Mexico.
Canada's Reply: Strengthened Fentanyl Measures and Withdrawal of Digital Services Tax
Prime Minister Carney responded promptly on Thursday evening, emphasising Canada's commitment to combating fentanyl and confirming that the country will abandon its proposed digital services tax—once a source of friction in bilateral trade negotiations.
'Canada will continue to protect its workers,' he affirmed, 'and has made vital progress in stopping the scourge of fentanyl in North America.'
The economic ties between the two nations remain deep. Canada is the United States' largest destination for exports and its third-largest source of imports.
In 2024, the US imported approximately £324 billion ($412 billion) worth of Canadian goods, while exporting about £275 billion ($350 billion) in return. Economists have cautioned that such tariffs risk raising consumer prices, disrupting supply chains and complicating the task of central banks already managing fragile monetary conditions.
Expansion of Tariff Diplomacy
The letter to Canada is not unique. Trump has issued over 20 comparable notices to leaders of countries including Brazil, Germany and India, indicating that duties as high as 50% may be imposed.
He singled out Brazil in particular, linking a proposed 50% tariff to what he described as the 'unfair prosecution' of former President Jair Bolsonaro.
Trump, who has repeatedly advocated tariffs as a means to revive US manufacturing, defended his policy: 'I think the tariffs have been very well–received. The stock market hit a new high today,' he told NBC News.
Expert Concerns
But economists have been critical. Many argue that aggressive tariffs could destabilise global trade at a time when inflationary pressures persist. Federal Reserve Chair Jerome Powell has cited trade uncertainty as one factor in the decision to delay interest rate reductions.
Politics Over Policy?
Although the tariffs are being presented as a measure to address the opioid crisis, observers argue the move carries political overtones. A Washington-based trade expert commented that 'this isn't about solving fentanyl. It's about signalling strength to a domestic audience.'
Canada now faces a stark choice: comply with broadly defined drug enforcement expectations or risk significant economic repercussions. This episode highlights how trade policy is increasingly becoming a forum for domestic political signalling, and raises serious questions about the future of North American economic integration.
