U.S. President Donald Trump has escalated his trade war with Canada, threatening sweeping new tariffs just one day before the August 1 deadline for a final tariff agreement between the two countries, reports Reuters.
The move comes after Canada announced its support for Palestinian statehood, a decision that Trump says will make it “very hard” to finalize a trade deal.
35% Tariff Threat Looms
Trump warned that the U.S. would impose a 35% tariff on all Canadian goods not covered by the existing U.S.-Mexico-Canada Agreement (USMCA) if no new deal is reached by Thursday.
“Wow! Canada has just announced that it is backing statehood for Palestine. That will make it very hard for us to make a Trade Deal with them,” Trump posted on Truth Social.
Canada-U.S. Trade Tensions Intensify
Canadian Prime Minister Mark Carney confirmed that negotiations with Washington had been constructive, but warned that talks may not conclude by the deadline.
“The talks are in an intense phase, but a deal that would remove all U.S. tariffs is unlikely,” Carney said.
Canada is the United States’ second-largest trading partner after Mexico, purchasing $349.4 billion in U.S. goods last year and exporting $412.7 billion to the U.S., according to the U.S. Census Bureau.
Canada is also the top supplier of steel and aluminum to the U.S., sectors that already face heavy tariffs, alongside vehicle exports.
Diplomatic Fallout Over Palestine
Carney announced Wednesday that Canada will formally recognize the State of Palestine at a United Nations meeting in September, following similar moves by France and Britain.
In announcing the decision, Carney condemned Israel’s actions in Gaza, saying: “Canada condemns the fact that the Israeli government has allowed a catastrophe to unfold in Gaza.”
Israel and the United States have both rejected Carney’s remarks. Carney’s office did not immediately respond to a request for comment on Trump’s threat.
Background: Digital Services Tax Clash
Tensions have been simmering for months. In June, Carney’s government scrapped a planned digital services tax targeting major U.S. tech companies after Trump abruptly ended talks, calling the tax a “blatant attack.”
The U.S. Tariff Watch remains focused on whether the White House and Ottawa can bridge their widening trade and diplomatic divide before the August 1 deadline.
Observers warn that new tariffs could hit North American supply chains, particularly the auto, steel, and aluminum industries, as well as broader economic ties between the two close allies.
