【By Observer Net, Zhang Jingjuan】According to China Central Television news, US President Trump has signed an executive order to raise the tariff rate on Canada from 25% to 35%, which will take effect on August 1.
Canadian Prime Minister Trudeau responded by expressing disappointment with the US decision. Some business groups and even his political opponents believe that Canada should not yield to Trump.
Some foreign media reports state that unlike Mexico, which was granted a 90-day tariff exemption, Canada was singled out to face more pressure.
Lori Turnbull, a political scientist at Dalhousie University in Halifax, Nova Scotia, Canada, said that Canada seems to be targeted. "When I see him (Trump) reaching agreements with Japan and the EU, I don't think it's good news for Canada, nor does it indicate that Trump is 'willing to reconcile', because he categorizes Canada as another group," she said.
Prime Minister Trudeau, who was previously the head of the central bank, won the election this April with the image of being the most suitable person to handle US-Canada relations. On August 1, he expressed his disappointment with the US decision but pledged to enhance Canada's economic resilience, achieve export market diversification, and gradually reduce over-reliance on the American market. Currently, more than three-quarters of Canada's exports go to the US market.
The report pointed out that for this new prime minister enjoying a political honeymoon, repairing the broken relationship with major trade partners is the top priority. It remains unclear whether he will pay a political price for failing to reach an agreement or get some breathing room. Some business groups and even Trudeau's political opponents have stated that it's better not to reach an agreement than to accept a bad one. Canada should stick to its position rather than accept unfair agreements like other G7 allies.
Pierre Poilievre, leader of the Conservative Party of Canada, criticized these tariffs as "unreasonable." He posted on the social platform "X" that Trudeau should stand firm, saying, "He should only accept an agreement that cancels all US tariffs on Canada." The Canadian Chamber of Commerce said that the Prime Minister's approach of prioritizing a strong, future-oriented agreement instead of a rushed one is correct.
"Canada takes the concerns of the US seriously, and we are working to alleviate or resolve any real areas of disagreement, but we do not want to just accept any agreement for the sake of a deadline sent via a copied letter on a social platform," said Matthew Holmes, Executive Vice President and Director of Public Policy at the Canadian Chamber of Commerce.
Canadian Prime Minister Trudeau IC photo
Since Trump returned to the White House and broke the friendly relations between the US and Canada through punitive tariffs and threats of making Canada the 51st state, Canadian officials have tried various strategies to deal with this unpredictable president.
The US has imposed 25% tariffs on Canadian cars, 50% on steel and aluminum, and 35% on imports that do not meet the conditions of the US-Mexico-Canada Agreement (USMCA) signed during Trump's first term. The US market has long relied on Canadian softwood, with about 80% of imported lumber coming from Canada. Last month, the US also increased tariffs on Canadian softwood lumber.
For Canada, a positive development is that most Canadian imports qualify for preferential tariff treatment under the USMCA, and thus are temporarily unaffected by the latest tariff measures. Data show that in May this year, nearly 60% of goods imported by the US from Canada were exempt, higher than 34% in January.
Economists say that over 90% of Canadian exports could qualify for the trade benefits of the USMCA, but some small and medium-sized enterprises had previously chosen not to apply, as their goods entered the US almost duty-free. Now, due to Trump's tariff policies, more companies are starting to apply for USMCA qualification.
The Bank of Canada states that the actual tariff rate on Canadian exports to the US is estimated at 5%, lower than the rate for most other countries.
However, tariffs and the uncertainty of future policies still put pressure on the Canadian economy, with specific industries suffering more severe impacts. The Bank of Canada said that the drop in exports caused by Trump's tariffs led to a slowdown in the second-quarter economic growth. Unemployment rates rose in industries dependent on trade with the US, and trade uncertainty also suppressed household spending and business investment.
Trudeau has been seeking an agreement to eliminate the tariffs, but he recently said there are no signs that an agreement with the US would completely eliminate them. He also hinted that negotiations might extend beyond the deadline set by Trump.
Trump's tariffs and threats to "absorb Canada economically" have angered Canadians. They have removed American beverages from shelves and boycotted American travel.
Months-long boycott actions have severely hit regions in the US that depend on Canadian tourists. US officials said this has made Trump very angry.
On July 31, the US announced that because Canada failed to cooperate with the US in controlling the flow of fentanyl and other illegal drugs into the US, and instead took retaliatory measures against the US, the US believes it is necessary to impose additional tariffs on Canadian goods.
Data from the US Customs and Border Protection show that less than 0.2% of the fentanyl seized by border patrol at land borders in fiscal year 2024 came from the northern border. Even so, Canada announced a $9 billion border plan last December and appointed a fentanyl officer this year to respond to US concerns.
"Using fentanyl as a reason is more absurd than the tax increase itself," said Dan Kelly, chairman of the Canadian Independent Business Association.
Earlier this week, US Commerce Secretary Howard Lutnick mentioned that Canada's dairy supply management system could be another reason for possible additional taxes by Trump.
On July 31, after Trudeau announced that he would conditionally recognize the State of Palestine, Trump immediately threatened on social media that the decision would make it harder for Canada and the US to reach a trade agreement, but less than 24 hours later, he said it might not be an insurmountable obstacle.
"That guy says one thing today, then wakes up tomorrow and changes his mind, switching to something else," Ontario Premier Doug Ford urged Trudeau to retaliate.
On May 6, local time, Trudeau visited the US and "clashed" with Trump.
Ontario accounts for about 40% of Canada's GDP and is the country's industrial center. Ford believes that Canada should impose a 50% countervailing tariff on US steel and aluminum imports.
He wrote on "X", "Canada should not accept any unsuitable agreement. This is not the time to give in. We need to stand firm on our position."
He emphasized that Canada has everything the US needs: oil and gas, critical minerals, steel and aluminum, electricity, potash, and uranium, and is the largest customer of the US, guaranteeing millions of American jobs. The Canadian government needs to maximize its influence and maintain a tough stance in the face of US tariffs.
President of the Canadian Auto Workers Union, Lana Payne, echoed Ford's view, stating that Canada has leverage and must use it, "because anyone who thinks the other side will stop asking for concessions should wake up."
Canadian Chamber of Commerce executive Holmes warned that retaliation could backfire and should be "highly targeted and precise" to avoid further damaging Canadian businesses.
August 1 is the deadline that US President Trump had previously set for trade partners. So far, some countries including the UK, Japan, and South Korea have reached trade agreements with the Trump administration. The US and the EU have also reached a framework trade agreement.
It remains unclear how Canada and the US will break the deadlock.
Dominic LeBlanc, a Canadian cabinet minister responsible for negotiations, told Canadian media that Canada has always clearly stated it will only accept appropriate agreements. "In the coming weeks, we will continue to negotiate with the US to strive for an agreement that puts us in a stronger position," he said.
LeBlanc also revealed that he will call US Commerce Secretary Lutnick next week and hopes for a meeting with the US in August.
"The door to negotiations is not closed, and dialogue continues," he said.
This article is an exclusive contribution from Observer Net, and may not be reprinted without permission.
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