Canada–US Trade Dispute Escalates as New 35% Tariffs Spark Political Division and Economic Concerns

Tensions between Canada and the United States have intensified this week following the imposition of new 35 per cent tariffs by the US government, up from a previous 25 per cent, in what Washington described as a response to continued Canadian "inaction and retaliation." 

The latest move by the White House comes after both sides failed to reach a new trade agreement by the August 1 deadline and amid growing concerns about the long-term future of bilateral economic cooperation.

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The increased tariff rate, which applies to goods not covered by the Canada-United States-Mexico Agreement (CUSMA), now affects key Canadian exports including steel, aluminum, and copper, with duty rates on these goods now standing at 50 per cent. 

According to trusted local media, the Canadian prime minister stated that he would engage with the US president “when it makes sense,” while emphasizing that approximately 85 per cent of Canadian trade with the United States remains tariff-free due to CUSMA protections.

However, the fallout from the trade escalation has sparked political friction within Canada, particularly among provincial leaders. 

In Ontario, calls have intensified for reciprocal tariffs to be applied immediately. Some leaders are advocating a dollar-for-dollar retaliation approach, arguing that Canada should respond with strength rather than leniency. 

Others, including leaders from western provinces, have urged restraint, suggesting that continued counter-tariffs may further harm domestic industries and should be reconsidered.

The prime minister convened virtual meetings with federal cabinet ministers and provincial premiers to align the national response. 

Ahead of those discussions, some provincial leaders expressed frustration at the economic pressure being placed on manufacturing sectors and local supply chains. 

In response to tariffs on industrial materials, one province has reportedly accelerated infrastructure procurement to support domestic steel output and cushion the local economy.

Despite the pressure, the federal government has continued its international outreach. Finance and foreign affairs ministers travelled to Mexico City this week to hold trade talks with Mexican officials, underscoring Canada’s interest in strengthening alliances with other North American partners amid rising uncertainty with Washington.

In the United States, officials stated that the Canadian leader had reached out prior to the tariff deadline but that no bilateral conversation occurred. 

While US authorities continue to express frustration over perceived Canadian inaction, Canadian officials maintain that their government remains committed to free and fair trade under existing agreements. 

The US president has warned that countries not entering new trade arrangements with the United States ahead of a broader Friday deadline may face additional punitive tariffs.

Although the majority of Canada’s exports to the US remain protected under CUSMA, the current dispute affects high-value commodities not included in the agreement. 

Some provincial leaders are also calling for broader domestic reforms, including tax cuts and interest rate adjustments, to support economic resilience amid trade disruptions.