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Trade agreements

Trump Increases Tariffs on Canadian Goods Amid Stalled Trade Talks

Strategic Insights

— 2 min read

The White House announced that Donald Trump has signed an executive order increasing tariffs on certain Canadian goods, effective midnight Thursday, as trade talks between Ottawa and Washington failed to produce a breakthrough. The order raises the "fentanyl tariffs" on Canadian goods to 35 per cent from 25 per cent, while exempting products that meet the rules of origin outlined in the United States-Mexico-Canada free trade agreement (USMCA). This move follows weeks of intensive trade negotiations that have yielded no significant progress. Trump has maintained that the tariffs are necessary to push Canada and Mexico to address drug trafficking, citing a "national emergency" on the border.

Key Takeaways:

  • The executive order raises the "fentanyl tariffs" on Canadian goods to 35 per cent from 25 per cent, effective midnight Thursday.
  • The tariffs do not apply to products that meet the rules of origin outlined in the USMCA, which has allowed most Canadian exports to continue crossing the border tariff-free.
  • Canadian goods shipped through third countries to avoid the tariffs will face a 40-per-cent "transshipment tariff."
  • Trade talks between Ottawa and Washington have stalled, with Canada maintaining that Trump's allegations about fentanyl trafficking are false.
  • The Canadian economy has mostly avoided the impact of the "fentanyl" tariffs due to the USMCA carve-out, but certain industries are being hammered by Trump's sector-specific levies.
  • The USMCA exemption has allowed nearly 60 per cent of Canadian goods to enter the U.S. tariff-free in May, according to U.S. Census Bureau data.
  • Industry-specific tariffs, including a 50-per-cent tariff on steel and aluminum imports, a 25-per-cent duty on auto imports, and a 50-per-cent tariff on copper products, will remain in place, even if Ottawa secures a deal.
  • Ontario Premier Doug Ford warned that Trump is unpredictable and urged Canadians to start on-shoring products and buying Canadian goods when possible.

Statistics:

  • The "fentanyl tariffs" on Canadian goods will increase to 35 per cent from 25 per cent, effective midnight Thursday.
  • The tariffs do not apply to products that meet the rules of origin outlined in the USMCA, which has allowed nearly 60 per cent of Canadian goods to enter the U.S. tariff-free in May, according to U.S. Census Bureau data.
  • The USMCA carve-out has allowed the Canadian economy to avoid the impact of the "fentanyl" tariffs, but certain industries are being hammered by Trump's sector-specific levies.
  • A 40-per-cent "transshipment tariff" will apply to Canadian goods shipped through third countries to avoid the tariffs.
  • Industry-specific tariffs, including a 50-per-cent tariff on steel and aluminum imports, a 25-per-cent duty on auto imports, and a 50-per-cent tariff on copper products, will remain in place, even if Ottawa secures a deal.

Sources:

  • The Globe and Mail
  • Reuters
  • White House fact sheet
  • U.S. Census Bureau data
  • Bank of Canada
  • Business Council of Canada

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