Goods traded in compliance with the USMCA – the vast majority of trade – remain exempt from the 35% tariffs.Cole Burston/Getty Images
Donald Trump signed an executive order Thursday evening increasing tariffs on some Canadian goods, the White House said, as Ottawa and Washington appeared unlikely to reach a trade agreement by the U.S. President’s Aug. 1 deadline.
The order, effective at midnight on Friday, raises the “fentanyl tariffs” that Mr. Trump imposed on Canadian goods in March to 35 per cent from 25 per cent.
This tariff does not apply to products that meet the rules of origin outlined in the United States-Mexico-Canada free trade agreement, which has allowed most Canadian exports to continue crossing the border tariff free. The executive order signed on Thursday extends this crucial exemption.
Prime Minister Mark Carney, in a statement early Friday morning, said the Canadian government is disappointed by Mr. Trump’s actions but remains committed to USMCA, the trilateral trade pact that governs most trade with the United States.
My statement on Canada-U.S. trade: pic.twitter.com/0PSG9kKtiO
— Mark Carney (@MarkJCarney) August 1, 2025
Mr. Trump’s move follows weeks of intensive trade talks between Ottawa and Washington that have failed to produce a breakthrough.
The President signed a separate order Thursday evening raising tariffs on dozens of other countries that had not reached an agreement with the White House. These tariffs range from 10 per cent to as high as 41 per cent, and follow through on a threat the President made in early April, before backing down in the face of market turmoil.
Trump signs executive order imposing new tariffs on a number of trading partners
Mr. Trump granted a 90-day extension to Mexico, allowing Mexico City and Washington to continue trade talks without the U.S. immediately increasing tariffs. As of Thursday evening, Canada had not secured a similar extension.
The executive order applies only to the blanket tariffs Mr. Trump imposed in March, not the separate industry-specific levies on steel, aluminum and autos.
Mr. Trump has maintained the “fentanyl” tariffs are needed to push Canada and Mexico to do more to address drug trafficking. This provided the legal grounds for Mr. Trump to impose broad-based levies on his neighbours by declaring a “national emergency” on the border.
The White House reiterated these arguments in a fact sheet about the executive order published Thursday.
Canada's fentanyl czar Kevin Brosseau, right, and Denver, a Canada Border Services Agency narcotics detection dog. Canada maintains the Trump administration’s allegations about fentanyl trafficking are false.Spencer Colby/The Canadian Press
“Canada has failed to cooperate in curbing the ongoing flood of fentanyl and other illicit drugs, and it has retaliated against the United States for the President’s actions to address this unusual and extraordinary threat to the United States,” the White House said, pointing to the countertariffs Ottawa has placed on some U.S. goods.
“In response to Canada’s continued inaction and retaliation, President Trump has found it necessary to increase the tariff on Canada from 25 per cent to 35 per cent to effectively address the existing emergency.”
The fact sheet said Canadian goods shipped through third countries to avoid the tariffs would face a 40-per-cent “transshipment tariff.”
Canada has maintained that Mr. Trump’s allegations about fentanyl trafficking are false, but Ottawa has increased spending on the border in recent months and appointed a “fentanyl czar” to combat drug smuggling.
New fentanyl data undercut White House’s portrayal of Canada’s role in U.S. drug crisis
The Prime Minister disputed Mr. Trump’s justification for the 35-per-cent tariff – namely that Canada is a significant source of the deadly opioid fentanyl smuggled into the United States.
“Canada accounts for 1 per cent of U.S. fentanyl imports and has been working intensively to further reduce these volumes,” Mr. Carney said. He noted that Canada has in recent months added “thousands of new enforcement and border security officers,” boosted aerial surveillance of the border as well as more security and intelligence operations.
In a Thursday afternoon White House press conference, Mr. Trump suggested to reporters that Mr. Carney had called him but they hadn’t spoken.
Prime Minister Mark Carney disputes Mr. Trump’s allegation that Canada is a significant source of fentanyl smuggled into the U.S.Chris Young/The Canadian Press
“We haven’t spoken to Canada today. He’s called,” Mr. Trump said.
He criticized Canadian political leadership, saying “They’ve been very poorly led” and repeated his contention that Canada has treated U.S. farmers “very badly” with protectionist policies.
The U.S. President, a big supporter of Israel, also used his Truth Social account to broadcast his dissatisfaction with Mr. Carney’s plan to recognize a Palestinian state.
But he later told reporters that Canada’s support for Palestine would not be a deal-breaker in reaching a trade pact.
Canadian negotiators have been in Washington this week trying to hammer out some sort of agreement that would lower tariffs on Canadian exports. The Prime Minister’s chief of staff Marc-André Blanchard remains there with Intergovernmental Affairs Minister Dominic LeBlanc.
Mr. Carney said on Wednesday that Canada’s negotiators will stay in Washington past Friday’s deadline if they failed to reach a deal by then. He has maintained that no deal would be better than signing a bad one.
Explainer: What are the current tariffs between Canada and the U.S.?
Mr. Trump has signed a series of agreements with trade partners over the past few months, including recent deals with the European Union, Japan and South Korea. These have all left baseline U.S. tariffs in place, ranging from 10 per cent to 20 per cent, as well as industry-specific tariffs – with some carve-outs.
The agreements have also involved pledges to increase investment in the United States and buy more U.S. products.
On Wednesday, Mr. Carney opened the door to the possibility a deal might include similar purchase and investment commitments by Canada.
“There are many areas for co-operation between Canada and the United States, including defence spending, security spending, investments, which is one of the reasons why we’re having these broader discussions,” he told reporters.
An employee works on the production line at the Martinrea auto parts manufacturing plant in Woodbridge, Ont.Chris Young/The Canadian Press
Business Council of Canada chief executive Goldy Hyder, who met with Republican Senators and U.S. trade officials in Washington this week, said on Thursday there seems to be a disconnect between what the U.S. wants and what Canada is putting on the table.
While Ottawa is trying to strike a grand bargain on trade, security and military spending, the Trump administration is focused on a handful of long-standing trade irritants, he said. “There’s a perception in the United States that Canada is busy playing chess, but there’s no one playing with it.”
Canadian negotiators need to shift their focus toward the renewal of the continental trade agreement, which is supposed to happen in 2026, he added. That’s a more formal venue in which to address U.S. complaints about things like automobile content rules, Canada’s supply-managed dairy industry, and softwood lumber, which appear to be tripping up the current negotiations.
“The only reason we’re surviving today is because of the [USMCA] exemption. Let’s be clear. If that disappeared tomorrow, we have a full-blown recession on our hands,” Mr. Hyder said.
The EU’s trade deal with the U.S. isn’t a blueprint for Canada, Carney says
Nearly 60 per cent Canadian goods entered the U.S. with a USMCA-compliant stamp in May, according to U.S. Census Bureau data. The Bank of Canada thinks that number could rise to as much as 95 per cent as more companies fill out the paperwork and rejig their supply chains to source more inputs from within North America.
The central bank said this week that the average effective tariff rate on Canadian exports to the U.S. is only around 5 per cent. That’s up from around zero at the start of the year, but considerably lower than most other countries.
While the Canadian economy has mostly avoided the impact of the “fentanyl” tariffs because of the USMCA carve-out, certain industries are being hammered by Mr. Trump’s sector-specific levies, known as 232 tariffs.
These include a 50-per-cent tariff on steel and aluminum imports, and a 25-per-cent duty on auto imports (with a carve-out for U.S. auto parts in Canadian and Mexican-made cars).
A 50-per-cent tariff on some copper products will come into force on Friday, and Mr. Trump has threatened other Section 232 tariffs on lumber, pharmaceuticals and semiconductors.
Mr. Carney said on Wednesday these industry-specific tariffs are likely to remain in place, even if Ottawa can secure a deal.
“The revealed approach of the United States in all those sectors has been to have tariffs, some base-level tariffs.”
Mr. Carney said on Friday that Canada will continue to negotiate the trading relationship with the United States but that Ottawa is now “laser focused” on strengthening the Canadian economy, by diversifying export markets, by working with provinces and territories to reduce internal trade barriers and by launching major national-building infrastructure and resource projects.
The Prime Minister said these initiatives have the potential to add more than half a trillion dollars of investment to the Canadian economy.
“Canadians will be our own best customer, creating more well-paying careers at home as we strengthen and diversify our trading relationships around the world,” Mr. Carney said.
Bessent indicates U.S. willing to work with Canada on metals tariffs
Ontario Premier Doug Ford told reporters in Thunder Bay on Thursday that he still hoped a trade deal could be reached that would spare Canada from tariffs – but warned that Trump was unpredictable.
“Prime Minister Carney’s trying his best, but this guy will say something one day, and he’ll wake up, and the cheese slips off the cracker, and then all of sudden, he goes the other way. And you’re thinking, ‘How do you deal with a guy like this?’ ” Mr. Ford said.
He said it was important to ensure that key imports from the U.S. that rely on Canadian raw materials, such as steel beams for construction and aluminum cans for pop and beer, are now completely manufactured north of the border. And he urged Canadian consumers to be careful to buy Canadian products when possible.
“Are we hoping that we can get a deal with zero tariffs? Yes. But I always say, ‘How we can kick back is – and it’s not the American people – kick back at President Trump is, let’s start onshoring everything, absolutely everything we possibly can,’ ” Mr. Ford said.
With a report from Jeff Gray and reports from Reuters