Trump threatens to impose 35% tariff on goods from Canada

• Trump has taken an openly aggressive position with Canada of late, threatening to call off talks altogether over the digital services tax, and now setting a new levy while the two sides are in the middle of negotiations.

Driving the news: "Instead of working with the United States, Canada retaliated with its own Tariffs," Trump wrote in a letter to Canadian Prime Minister Mark Carney that he shared on Truth Social.

• "Starting August 1, 2025, we will charge Canada a Tariff of 35% on Canadian products sent into the United States, separate from all Sectoral Tariffs," said Trump in the letter that accused Canadian officials of not doing enough to stop the flow of fentanyl across the border.
• "[T]here will be no Tariff if Canada, or companies within your Country, decide to build or manufacture product within the United States," he added.
• "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 35% that we charge."

What they're saying: Carney said on X the Canadian government "has steadfastly defended our workers and businesses" and will "continue to do so as we work towards the revised deadline of August 1."

By the numbers: Stock futures plunged after Trump posted the Canada letter, with the S&P 500 indicated almost 0.6% lower late Thursday.

• "The US dollar is climbing against most of its major peers and volatility assumptions are ratcheting back up as traders brace for more turbulence ahead," wrote Karl Schamotta, chief market strategist at Corpay, in a note late Thursday.

Thought bubble: A stable economy and strong financial markets appear to have emboldened the president to push harder on his natural preference for tariffs, as Axios' Neil Irwin noted this week.

State of play: Canada is the most significant trading partner of the more than 20 countries to receive a tariffs threat letter this week from Trump, who told NBC News Thursday he plans to have levies of 15% or 20% on most trading partners.

• The North American neighbor was the third-biggest source of U.S. goods imports last year ($413 billion) and the top destination for exported United States goods ($349 billion), per Census Bureau data.
• "When taking into account both goods and services trade, Canada was the second-largest U.S. trade partner in 2024," according to a congressional report.

Of note: Trump has repeatedly blamed Canadian officials for allowing fentanyl to cross the border into the U.S. even as data shows that less than 1% of fentanyl seized in the United States last year entered through Canada.

• Meanwhile, Canadian officials have blamed the U.S. for a flood of illegal guns into Canada.

Go deeper: Global trade (back) in limbo

Editor's note: This article has been updated with new details throughout.