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An administration official from the United States has indicated that the 35% tariffs threatened by President Donald Trump on Canadian goods are likely to apply only to products traded outside the United States-Mexico-Canada Agreement (USMCA). Currently, goods outside this agreement face 25% tariffs.
The official stated that the proposed higher tariffs, expected to take effect on August 1, would not cover goods traded under the USMCA or oil, gas, and potash traded outside the agreement, which are currently subject to 10% tariffs. However, the official noted that no final decision had been made and no formal documentation was yet drafted on the issue. The source spoke on condition of anonymity.
This announcement follows a week marked by the U.S. President’s failure to meet his goal of concluding “90 deals in 90 days,” instead issuing multiple letters threatening new tariffs on various countries amid ongoing global trade tensions. The August 1 deadline was reiterated as the point at which the higher tariffs could be implemented if agreements are not reached.
The letter sent to Canada was addressed to Prime Minister Justin Trudeau and arrived despite ongoing negotiations and concessions from Ottawa aimed at addressing U.S. concerns. President Trump mentioned a recent conversation with Canadian officials but provided few details. On July 12, he described the letter as “fairly well-received” and encouraged continued negotiations.
In response, Prime Minister Trudeau announced plans for a cabinet meeting on July 16 to discuss the negotiations, followed by a meeting with provincial and territorial premiers on July 22 in Huntsville, Ontario.
At the previous month’s G7 summit in Kananaskis, Alberta, Trudeau and Trump agreed to negotiate an economic and security deal within 30 days, a deadline that has since been extended to August 1.
The President’s letter raised concerns about fentanyl trafficking from Canada, retaliatory tariffs imposed by Canada earlier this year in response to U.S. tariffs, and Canada’s supply management system for dairy and eggs. Trump suggested that cooperation on fentanyl enforcement could lead to adjustments in the tariff threat and warned that any increase in Canadian retaliatory tariffs could prompt further U.S. tariff increases.
Earlier, the U.S. imposed 25% tariffs on Canadian and Mexican goods outside the USMCA framework, citing fentanyl concerns, and also applied sector-specific tariffs on steel, aluminum, and autos. Canada has responded with measures to strengthen border enforcement against fentanyl smuggling, including regulatory changes. According to U.S. data, 43 pounds of fentanyl were seized at the Canadian border last year, representing a small fraction of the total seized nationally.
Canada has rolled back some retaliatory tariffs and canceled a digital services tax following U.S. pressure. Nonetheless, the U.S. has recently escalated tariffs, doubling those on steel and aluminum to 50%, announcing plans for a 50% tariff on copper, and proposing tariffs on pharmaceuticals.
Trade experts have characterized the U.S. approach as transactional, with demands evolving to seek greater concessions. Canadian labor representatives have urged the government to consider stronger countermeasures, including increased retaliatory tariffs or stockpiling critical exports, to leverage negotiations with the U.S.
Industry analysts have noted the risk of countries accepting punitive tariff agreements simply to avoid prolonged uncertainty. Before recent developments, global tariffs generally remained in the single digits.
Canada’s Industry Minister, Mélanie Joly, acknowledged the government’s cautious stance on retaliation, emphasizing the need to balance pressure on the U.S. administration with the protection of Canadian jobs.
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