Trump Threatens 35% Canada Tariff, Floats Higher Blanket Rates

President Donald Trump will levy a 35% tariff on some goods coming into the US from Canada, in a blow to Canadian Prime Minister Mark Carney’s bid to avoid punishing levies on goods sold to the US. The tariff level would take effect from Aug. 1.

“Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, Non-Tariff, Policies and Trade Barriers, which cause unsustainable Trade Deficits against the United States,” Trump said in a letter to Carney posted Thursday.

The announced rate is an increase from the current 25% tariff on Canadian imports not covered by the trade deal negotiated between the US, Canada and Mexico, which do not face additional tariffs. That exclusion would remain unchanged, according to a official, who spoke on condition of anonymity to discuss the matter.

Trump is also leaving in place a lower 10% tariff on energy related imports as well as his increased levies on key goods including metals, the official said. The situation remains fluid and the legal order has not yet been drafted, they cautioned.

That formula would be a far more modest change to the trading relationship than an across-the-board 35% rate, and would preserve exceptions for closely integrated sectors like the auto industry.

Still, the letter suggests Trump is intent on ratcheting up rather than scaling back his trade war with the US’s northern neighbor - which he has mused publicly should consider becoming the 51st state — despite furious efforts by Canadian officials to broker a deal. The US dollar gained 0.6% against its Canadian counterpart following the post to the president’s social media account.

Trump’s announcement came as he told NBC News Thursday he is eyeing blanket tariffs of 15% to 20% on most trading partners, adding that the exact levels are being worked out now. The current blanket tariff rate is 10%.

Taken together, the moves signal no retreat from his flagship economic policy, with Trump noting to NBC the recent rise in US equity markets even as Trump plans higher tariff rates on major trading partners that would start within weeks.

US stock futures slumped while the greenback climbed against major peers in Asian trading. The Canadian dollar led losses among Group-of-10 currencies, followed by risk sensitive Australian and New Zealand dollars in fear a further disruption to trade may impact global growth.

The president has spent the week sending missives to trading partners, informing them of new rates that will kick in on Aug. 1 if they cannot negotiate better terms. Letters to members of the European Union are also expected shortly.

Trump’s Canada announcement came after officials in Ottawa already moved this week to denounce US plans to impose a 50% import tariff on copper.

“We are waiting for the details of this decision by the White House and by the president, but we’ll fight against it, period,” Canada Industry Minister Melanie Joly said earlier Thursday.

The talks between the US and Canada had already shown signs of stress. Last month, Trump cut off negotiations temporarily after Canada moved to impose a digital services tax, only for the Canadian government to drop the initiative.

While most Canadian exports were shielded from Trump’s tariffs thanks to the trade agreement, known as USMCA, the president had imposed a 25% tariff on many goods citing the threat of fentanyl. Data from the US government suggests that very little of the highly addictive drug is trafficked across the US-Canadian border. Metals, including steel and aluminum, were already subject to a 50% tariff.

Trump did allow that he would “consider an adjustment to this letter” if Canada worked with him to stop the flow of fentanyl. But he criticized Canadian authorities for their existing tariffs on US dairy products and said the government had “financially retaliated against the United States.”