President Donald Trump’s new 35% tariff on Canadian goods took effect Friday, August 1, raising duties by 10 percentage points from the previous 25% rate and deepening the trade war between the United States and its largest trading partner.
The increase applies to Canadian imports not covered under the Canada-United States-Mexico Agreement, commonly known as CUSMA. Goods that qualify as CUSMA-compliant remain exempt from the higher duties, a carve-out that shields an estimated 95% of Canadian exports from the steepest tariff rates.
The tariff escalation was announced by Trump on July 11 in a letter to Canadian Prime Minister Mark Carney, citing Canada’s retaliatory tariffs against the US and what Trump described as inadequate efforts to curb fentanyl trafficking across the northern border. The White House had previously warned that any escalation by Ottawa could trigger even higher rates.
Under the new order, goods transshipped through third countries to evade the tariffs will face a 40% duty, a provision designed to close loopholes that Canadian exporters could use to reroute shipments. Energy products and potash exports continue to benefit from existing exemptions, protecting critical sectors of cross-border commerce.
Canada has responded with its own retaliatory measures, though the scope remains narrower than Trump’s actions. Prime Minister Carney has outlined plans to expand international trade partnerships and reduce US dependence, while seeking to advance CUSMA negotiations scheduled for 2026. Canadian officials have emphasized that their retaliatory tariffs target goods where domestic alternatives exist, aiming to minimize disruption for Canadian consumers and businesses.
The tariff increase comes amid a broader reassessment of North American trade dynamics. US imports of Canadian motor vehicles dropped roughly 22%, or $5.6 billion, between April 2025 and March 2026 compared to the prior year, reflecting the cumulative impact of escalating trade barriers. Meanwhile, Canadian imports of US alcoholic beverages plummeted approximately 81% over the same period as Canadian consumers shifted away from American products.
Economists warn that the continued escalation risks disrupting deeply integrated supply chains, particularly in the automotive, lumber, and manufacturing sectors where goods cross the border multiple times during production. The new 35% rate, combined with existing sectoral tariffs on steel, aluminum, and copper, creates a layered system that analysts say is increasingly difficult for businesses to navigate.
The move also comes as Trump simultaneously imposed new tariffs on approximately 60 other trading partners, ranging from 10% to 12.5%, under a separate forced-labor framework that took effect July 25. Together, these actions represent one of the most aggressive expansions of US trade barriers since the Supreme Court struck down Trump’s original reciprocal tariffs in February 2026.
CBC News: What You Need to Know About the 35% Canada Tariff | Norton Rose Fulbright: Trade Deal Impasse | Tax Foundation: 2026 Tariff Tracker
Author: Finance Desk
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