The trade dynamic between the U.S. and Canada has reached a new critical juncture, characterized by an on-again, off-again relationship under President Donald Trump.
Late Sunday, Canadian Prime Minister Mark Carney announced that negotiations had resumed after Canada decided to hold off on implementing a Digital Service Tax. This tax would have levied a 3% charge on U.S. technology companies, which had drawn President Trump’s ire and led him to suspend discussions just days earlier.
The two countries had set a deadline of July 21 for concluding a trade deal, but the road to that agreement has been fraught with challenges especially since Trump’s election victory in November 2024.
On November 25, Trump took to social media to proclaim his intention to impose 25% tariffs on all imports from Canada and Mexico, citing national security concerns fueled by border security issues.
By January 20, he further escalated tensions by assigning Cabinet members to evaluate what he termed “unlawful migration and fentanyl flows” from Canada, Mexico, and China. He mandated that officials recommend trade and national security measures to address this perceived emergency.
On February 1, the situation intensified, with Trump ordering 25% tariffs on Canadian and Mexican goods alongside a 10% tariff on imports from China, set to take effect shortly after.
However, on February 3, following some diplomatic endeavors, Trump announced a temporary one-month pause on the tariffs after the U.S. reached agreements with Canada and Mexico to enhance border enforcement.
As the end of the one-month moratorium approached, Trump reaffirmed his intention to impose the tariffs, and on March 4, they came into effect at 12:01 a.m. ET, igniting a significant trade conflict.
Both Canada and China swiftly retaliated with their own tariffs, while Mexican President Claudia Sheinbaum expressed strong disapproval but opted to delay retaliatory actions pending further conversation.
The tense environment persisted, with Trump announcing a one-month delay of auto tariffs on March 5, a response to concerns voiced by major U.S. automakers including Ford, General Motors, and Stellantis.
Just two days later, Trump signed executive orders that momentarily paused tariffs on Canadian and Mexican goods that complied with the United States-Mexico-Canada Agreement (USMCA).
March 9 marked a significant political shift as Mark Carney was elected as Canada’s new Prime Minister. During his acceptance speech, Carney addressed the tariffs imposed by Trump, deeming them the “greatest crisis of our lifetimes.”
Tensions remained high with Canadian Premier Doug Ford threatening a 25% surcharge on electricity exported to the U.S., which initiated a series of threats from Trump to increase steel and aluminum tariffs on Canada.
On March 12, the U.S. imposed 25% tariffs on all steel and aluminum imports. Following negotiations, Trump decided against doubling the tariffs on Canada, leading to a temporary detente as Ford rescinded his electricity surcharge threat.
In retaliation, Canada announced tariffs on approximately $20.7 billion worth of U.S. goods, solidifying the contentious nature of the ongoing economic relationship.
In early April, Trump introduced what he termed “Liberation Day” tariffs but exempted Canada from steep reciprocal measures and a universal 10% tariff. However, on April 3, 25% tariffs on vehicles imported into the U.S. were enforced, raising alarms in Canadian leadership as they accounted for significant portions of U.S. imports in the automobile sector.
Following this development, Carney criticized the tariffs, stating it indicated the end of a trade system historically anchored in cooperation with the United States.
In response, Canada implemented 25% retaliatory tariffs on non-USMCA-compliant vehicles coming from the U.S. by April 9.
To mitigate the impact of tariffs on businesses, Canada announced a six-month pause on certain levies for U.S. goods that supported Canadian manufacturing, processing, and public health initiatives, including the food and beverage sector.
As Canadian politics evolved with the Liberals securing the most seats in parliament on April 28, Carney’s leadership continued to come under scrutiny, particularly as Trump provocatively suggested in a social media post that Canadians should support his bid for re-election to secure the country’s status as the 51st state.
When Carney visited the White House on May 6, he firmly asserted that Canada is “not for sale,” in response to Trump’s comments.
By late May, a series of legal challenges culminated in federal courts invalidating some of Trump’s boldest tariffs, particularly the 25% levies on Canadian imports.
However, the fight over tariffs was far from over, as a federal appeals court swiftly reinstated them just a day later.
The escalation of tariffs reached a new height in June when Trump raised the tariff on all foreign steel and aluminum from 25% to 50%.
At the G7 summit on June 16 in Alberta, Canada, amidst the escalating tensions, Carney and Trump indicated that a trade deal might be achievable within 30 days.
However, by June 27, trade discussions were once again suspended by Trump due to Canada’s plans to proceed with the taxation of U.S. technology companies, leaving the economic relationship in a precarious position as both nations navigated an uncertain future.
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