U.S. President Donald Trump escalated tensions with Canada just one day before a critical trade deadline.
On Thursday, he warned that it would be “very hard” to reach a trade agreement with Ottawa after Prime Minister Mark Carney announced Canada’s plan to recognize Palestinian statehood.
Trump issued the warning via Truth Social, linking Canada’s foreign policy decision directly to trade negotiations.
“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,” he wrote.
The deadline for a new agreement is August 1. If the two countries fail to strike a deal by then, the United States will impose a 35 per cent tariff on all Canadian goods not covered by the existing U.S.-Mexico-Canada Agreement (USMCA).
Canada remains the United States’ second-largest trading partner, after Mexico. Last year, it purchased USD$349.4 billion in U.S. goods and exported USD$412.7 billion to the American market, according to the U.S. Census Bureau. Additionally, Canada is the leading supplier of steel and aluminum to the U.S., industries that already face tariffs. Canadian vehicle exports could also be hit.
Trump’s trade threats come as talks between the two countries enter a critical phase. Carney said negotiations had been “constructive,” but he admitted that a comprehensive deal eliminating all tariffs remained unlikely. Canada’s top negotiators, Ambassador Kirsten Hillman and Minister Dominic LeBlanc, echoed this view. They said the talks were ongoing but cast doubt on whether a final agreement would come before the deadline.
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Trump hinted that tariffs would follow if no deal materializes
In addition to the looming 35 per cent tariff, Trump announced a new 50 per cent levy on semi-finished copper products. The tariff, which targets copper pipes and wiring, is set to take effect Friday. The White House stated the measure would apply to copper-heavy manufactured goods and aimed to protect domestic industries.
Trump hinted last week that further tariffs could follow if no deal materializes. “We may not reach an agreement with Canada,” he said, signalling his administration’s willingness to use economic pressure to achieve political aims.
The new trade uncertainty comes amid growing diplomatic tension. Canada’s recognition of Palestinian statehood marks a significant policy shift. At a recent press conference, Carney announced that Canada would support a United Nations resolution in September to recognize Palestine as a state.
“Canada condemns the fact that the Israeli government has allowed a catastrophe to unfold in Gaza,” Carney said, referencing starvation and humanitarian crisis in the region. He joined Britain and France in supporting a two-state solution, aligning Canada with an increasingly vocal group of Western allies taking that stance.
However, Israel and the United States both swiftly condemned the move. Trump, who earlier seemed to tolerate similar declarations from British Prime Minister Keir Starmer, has since reversed course. He reiterated his strong support for Israel, saying that recognizing Palestine “rewards Hamas.” His comments suggest a hardening stance as the international movement to support Palestinian statehood gains momentum.
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Discussions remain active
Further complicating matters, Canada recently withdrew a proposed digital services tax targeting major U.S. tech firms. The measure, which had been expected to generate revenue from companies like Google and Amazon, was dropped after Trump abruptly ended related trade discussions. He described the tax as a “blatant attack” on U.S. interests.
The timing of that decision has raised eyebrows in both countries. Critics suggest that Ottawa pulled the tax to preserve broader trade negotiations. However, the move did not appear to soften Washington’s position. Trump’s rhetoric has only intensified, tying Canada’s stance on foreign policy to trade consequences more directly than before.
Meanwhile, Canadian officials continue to express cautious optimism. “The discussions remain active,” said Hillman. “We are working toward a constructive solution, but we may not get there in time.”
LeBlanc emphasized Canada’s economic ties with the U.S., noting the interdependence of both markets. “Our relationship with the United States is vital. We want to maintain that strength, even when we disagree,” he said.
However, Trump’s messaging suggests that diplomacy may not be enough. His administration appears ready to use economic tools to punish Canada’s diplomatic choices. In doing so, he risks destabilizing one of the most important bilateral trade relationships in the world.
The U.S. business community is watching closely. Sectors like manufacturing, energy, and agriculture rely heavily on cross-border trade with Canada. Additional tariffs could increase costs and disrupt supply chains, particularly for industries already facing global uncertainty.
In Ottawa, Carney’s office has not responded to Trump’s comments. Analysts say the prime minister is walking a fine line, asserting Canada’s values on the world stage while trying to shield its economy from fallout.
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“It’s about human lives”
Carney’s decision to back Palestinian statehood appears grounded in humanitarian concerns.
“There is a moral responsibility to respond to the suffering in Gaza,” one senior Canadian diplomat said on background. “This isn’t just political—it’s about human lives.”
In the coming days, all eyes will be on Washington and Ottawa. If the two countries fail to reach a deal by August 1, Canada could face steep tariffs on a wide range of goods. The move would mark a sharp turn in North American relations, as geopolitical disagreements spill over into economic policy.
For now, both governments remain locked in high-stakes talks.
