• Trump signed an executive order raising tariffs on Canadian goods to 35% from 25%.
• The increase is justified by claims of Canada's inaction on fentanyl smuggling.
• New rates will affect all items not covered by the US-Mexico-Canada Agreement.
• Trump hinted at retaliatory tariffs due to Canada's recognition of Palestine's statehood.
• Canadian officials and industries express disappointment and plan countermeasures.

U.S. President Donald Trump has increased the tariff on Canadian goods to 35%, up from 25%. This decision, enacted through an executive order, aims to enforce new rates starting August 1, 2023, which the White House justified by stating that Canada has not adequately addressed the cross-border flow of fentanyl and other illicit drugs, a point that has been contested by Canadian officials, according to Channel News Asia and SCMP.

The increase applies to all goods not covered by the US-Mexico-Canada trade agreement (USMCA), with a notable 40% transshipment levy on products rerouted through other countries to avoid tariffs. This action follows months of escalating tensions in U.S.-Canada trade relations, as emphasized by a White House fact sheet, which pointed to Canada's prolonged inaction in negotiations, according to Reuters and India Times.

During this announcement, Trump criticized Canada for its historical tariff practices, stating, "They have been treating our farmers very badly for years," and maintained that the new rates were a matter of fairness. This sentiment was echoed in recent discussions where he voiced frustration over Canada's higher tariffs on U.S. agricultural products, which allegedly reach over 200%, according to India Times and BBC.

In response to the tariff hike, Canadian officials expressed their disappointment. Prime Minister Mark Carney emphasized Canada's commitment to negotiating a fair trade relationship while hinting at potential counter-tariffs against U.S. exports, particularly in steel and aluminum, should further trade disputes arise. He reaffirmed Canada's goal to protect jobs and encourage industrial competitiveness in light of escalating trade tensions, as reported by SCMP and Reuters.