In a Thursday letter to Canadian Prime Minister Mark Carney, US President Donald Trump announced a steep hike in tariffs on many goods imported from Canada raising the rate to 35 per cent starting August 1. 

The move marks a significant escalation from the earlier 25 per cent tariffs imposed in March and risks further straining the decades-old alliance between the two North American neighbours.

Trump’s letter cites fentanyl smuggling and a persistent trade deficit primarily due to US oil imports from Canada as key reasons behind the tariff hike. “I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers,” Trump wrote.

Also Read:‘Brazil is a sovereign country’: Lula hits back after Trump imposes 50% tariffs over Bolsonaro ‘witch hunt’ trial  

Markets watch as tensions rise

The tariff decision comes at a time when the global economy is already on edge, despite recent gains in the S&P 500 index gains that analysts say reflect investor hopes that Trump may still walk back the hike. In the past week alone, Trump has sent similar tariff warning letters to over 20 countries, but Canada the US’s second-largest trading partner appears to be drawing the most attention.

The Canadian government has already imposed retaliatory tariffs on select US goods and has rejected Trump’s suggestion of making Canada the “51st state.” Interestingly, while Mexico also faces 25 per cent tariffs over fentanyl-related concerns, it has not faced the same level of scrutiny from Trump.

Also Read:Trump’s BRICS barb rattles India-US trade deal hopes as new tariff wave rolls out 

Canada looks to Europe, UK for support

Carney, who took office in April with a message for Canadians to “keep their elbows up,” has signalled a pivot in foreign policy. Hours before Trump’s letter was made public, the Canadian prime minister posted a photo with British Prime Minister Keir Starmer, writing on X: “In the face of global trade challenges, the world is turning to reliable economic partners like Canada.”

Observers say the post was a veiled jab at the US under Trump’s leadership, whose unpredictable trade stance has made traditional allies uneasy. Carney has pushed for deeper ties with the EU and UK, in a bid to reduce economic dependence on the United States.

Tariff diplomacy takes personal turn

During Carney’s May visit to the White House, Trump reportedly said there was “nothing” the Canadian PM could do to convince him to withdraw the tariffs. “Just the way it is,” Trump added.

Carney, however, indicated a long-term approach. “There are much bigger forces involved,” he said. “And this will take some time and some discussions.”

The letter to Canada follows Trump’s 50 per cent tariff imposition on Brazilian goods just a day earlier, which cited political instability stemming from the ongoing trial of ex-president Jair Bolsonaro a case that echoes Trump’s own legal troubles related to the 2020 US election.