President Donald Trump has imposed an abrupt increase in tariffs on imports from Canada on some of the country’s aluminium products from 25% to 35%. This comes after high-stakes trade talks between Washington and Ottawa broke down.
Now, the Trump administration claimed that Canada had not done enough to stop the flow of fentanyl and other illegal drugs into the United States.
In a fact sheet, the White House stated that while Canada had long been an economic partner and close ally, it had allowed the export of fentanyl and its analogues to grow into a significant part of its economy, despite the drug’s deadly nature. The statement also said that Canada had responded with hostility toward the United States’ earlier tariffs instead of working toward solutions to the global crisis.
However, products traded under the US-Mexico-Canada Agreement (USMCA) continue to be excluded despite the tensions. This means that many American companies, especially in the auto and manufacturing sectors, will continue to be able to import Canadian goods without extra duties — well, for the time being, anyway.
US spares supply chains, but trade tensions escalate
The waiver on USMCA-covered goods follows heavy lobbying by US automakers and many large manufacturers. These companies cautioned that new tariffs could destabilize the supply of critical components and products to American factories.
With the USMCA carve-out, the Bank of Canada says that the effective tariff rate on Canadian goods entering the US will increase from approximately 5% to higher levels in light of the new 35% tariff, depending on how that new tariff is implemented.
One of the world’s biggest trade partnerships is between the US and Canada. In 2024, the US imported $475 billion of Canadian goods and services, while exporting $440 billion to Canada, largely in cars and industrial and consumer goods.
Early estimates suggest that Canadian aluminum, steel, lumber, and agricultural products are seen as the most likely targets of the latest round of tariffs. Canadian exporters whose goods are hit by the increased border costs could also face reduced demand or have to cut prices to remain competitive in the US marketplace.
There was no immediate response from Canadian authorities. However, people familiar with the thinking within the Canadian Trade Ministry say they have several ways to respond, and the cause for concern remains that there will be another kind of tit-for-tat.
US slaps new tariffs on more countries
Canada isn’t alone. The White House also issued new tariffs on multiple other nations. Countries with a trade surplus in goods with America will face a base tariff of at least 15%.
India will face a 25% duty . Taiwan faces a 20% levy. Swiss products will be subject to a 39% tariff, while South African exports get a 30% duty. Even where Thailand and Cambodia agreed on last-minute deals, they will still face a 19% tax.
President Trump has retained a minimum worldwide tariff of 10% but now openly contemplates harsher penalties.
The decision came just ahead of a deadline set by President Trump for finalizing trade agreements. However, the White House has yet to confirm when the new tariff rates will take effect.
So far, financial markets have remained relatively calm. In early Asian trading, both the Canadian dollar and South African rand showed minimal movement.
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