White House cites fentanyl, Palestine stance in raising tariffs ahead of stalled trade talks
The White House raised tariffs on Canadian imports to 35 percent, effective August 1, while granting Mexico a 90-day delay—despite earlier threats to raise both rates simultaneously.
US President Donald Trump signed the executive order Thursday, increasing the tariff rate from 25 percent, according to the White House statement reported by CBC.
The White House cited Canada's alleged failure to curb the flow of fentanyl across the northern border as grounds for invoking the International Emergency Economic Powers Act, a 1977 law that allows for emergency economic measures.
However, in a post earlier that morning, Trump tied the tariff decision to Canada’s announcement that it planned to recognise Palestinian statehood.
Trump posted on Truth Social that “Canada has just announced that it is backing statehood for Palestine,” adding that this would make it difficult for the US to strike a trade deal with the country.
Source: Donald J. Trump (@realDonaldTrump) via Truth Social
Prime Minister Mark Carney announced that Canada will recognize the State of Palestine during the United Nations General Assembly in September 2025, citing “widespread starvation in Gaza” as a crucial motivator.
He added: “Canada condemns the Israeli government’s failure to prevent the rapidly deteriorating humanitarian disaster in Gaza.”
The announcement was immediately rejected by both the United States and Israel.
While Mexico received a temporary reprieve, Trump followed through on the Canadian tariff hike.
According to Forbes, only 19.1 percent of Canadian goods are USMCA-compliant in 2025, a sharp drop from 37.9 percent in 2024, suggesting most exports will be impacted by the hike unless exempt.
Despite this, the vast bulk of Canada’s exports—around 90 percent—still qualify for tariff-free entry under USMCA, as noted in the CBC report.
Compliance for key categories has declined.
Passenger vehicles from Canada, the second most valuable Canadian export after oil, dropped from 97.6 percent to 72.7 percent USMCA-compliant, according to Forbes.
Compliance for motor vehicle parts also fell from 77.7 percent to 27.3 percent. Canada exported US$412.7bn in goods to the US last year and imported US$349.4bn, based on US Census Bureau data cited by Reuters.
Trump’s order is already facing legal scrutiny.
The Guardian reported that the US government has asked a federal appeals court to overturn a trade court ruling that the president lacked the authority to impose such tariffs under emergency powers.
Some commentators noted that Trump’s statement linking the hike to Canada’s foreign policy stance could influence the legal outcome.
Carney’s office did not confirm whether a call was made to the White House on Thursday.
Trump, when asked by reporters whether Canada’s Palestinian position was a deal-breaker, said, “I didn’t like what they said, but you know, that’s their opinion. Not a deal-breaker. But we haven’t spoken to Canada today. He’s called and we’ll see.”
Ontario Premier Doug Ford called the tariff increase “concerning” and urged retaliation.
“Canada shouldn’t settle for anything less than the right deal,” he said on X, advocating for 50 percent tariffs on US steel and aluminum.
David Paterson, Ontario’s representative in Washington, advised against overreacting. “The sun will shine in the morning and we will carry on,” he said on CBC’s Power and Politics.
“We really support the prime minister’s approach. When the time is right for that agreement to come together, it will.”
Trump’s Commerce Secretary Howard Lutnick told Fox Business Network that he didn’t expect Trump to “step off the gas,” criticising Canada for retaliating against previous US tariffs.
White House press secretary Karoline Leavitt said last‑minute deals were needed to avoid further tariff hikes.
She warned that “those countries that either do not have a deal or have a letter, they will be hearing from this administration by the midnight deadline tonight.”
Countries without trade deals or prior tariff notifications would receive official communication by midnight, her office confirmed
According to The Guardian, Trump’s sweeping tariff overhaul introduced revised rates for countries worldwide, with rates now ranging from 10 to 41 percent.
While countries like Japan and South Korea saw tariff rates adjusted downward, Canada’s rate increased. Goods that comply with USMCA are still exempt from the increase.
Trade negotiations between Canada and the US remain unresolved.
Carney had previously described talks with Washington as constructive, but also noted they were unlikely to eliminate all tariffs by the deadline.
Canadian officials have downplayed the urgency, citing the USMCA exemption covering most exports.
Negotiators remain in Washington, though details of their meetings have not been disclosed.
Last month, Canada withdrew a proposed digital services tax targeting US tech firms after Trump abruptly ended trade talks, describing the tax as a “blatant attack,” according to Reuters.
Canada remains the top supplier of steel and aluminum to the US, sectors directly affected by Trump’s ongoing tariff measures.
The White House’s latest executive order imposes a 50 percent global tariff on those metals, as reported by Forbes, with the Canadian-specific increase being the most legally advanced among ongoing challenges.
