Canada faces new Trump tariffs: better than no deal?

The trade relationship between Canada and the United States has entered a new phase of tension following U.S. President Donald Trump's decision to impose tariffs of up to 35% on a variety of Canadian products. While Mexico obtained a 90-day reprieve, Canada directly confronted the tariffs , generating concern among business leaders, citizens, and political analysts.

Canadian Prime Minister Mark Carney expressed disappointment at the failure to reach a new agreement by the August 1 deadline. However, he defended his government's strategy: "It's better not to sign a bad deal than to buckle under pressure," he said, while vowing to diversify Canada's trade relationships and reduce its dependence on the U.S. market .

Despite the potential immediate impact of the new tariffs on steel, aluminum, and softwood lumber , Carney has received support from various sectors. The Canadian Chamber of Commerce supported his position, noting that a rushed agreement could compromise the country's long-term economic interests.

Even his main rival, Conservative leader Pierre Poilievre , agreed that the government must not bow to pressure. In a post on X, he called the tariffs “unjustified” and urged Carney “to accept nothing less than a deal that eliminates all U.S. tariffs on Canada.”

Trump's tariff policy has been volatile. He has imposed various levies on Canadian products: 25% on automobiles , 50% on steel and aluminum , and now 35% on products that do not comply with the USMCA . Although Trump had already renegotiated the United States-Mexico-Canada Agreement (USMCA) during his first term, he continues to toughen his trade stance with Canada, sparking speculation that the motives are more political than economic.

These decisions have even been announced in misspelled letters , according to Canadian media, or in social media posts , which has been interpreted as an intimidation strategy rather than formal diplomatic negotiations.

Despite the sanctions, Canada is not completely defenseless . More than 60% of Canadian exports to the U.S. already meet USMCA requirements, allowing them to avoid the harshest tariffs . According to economists, more than 90% of exports could qualify under the agreement if Canadian companies adjust their processes and certifications, although the cost of doing so could be high, especially for small and medium-sized businesses.

This forced adaptation to the USMCA has led to an increase in certification requests, driven by fears of Trump's measures.

According to the Bank of Canada , the effective tariff rate on Canadian exports to the United States is 5%, lower than that applied to most countries. However, the recent wave of tariffs is already impacting the domestic economy : Canadian GDP slowed in the second quarter due to a 25% drop in exports , and unemployment rose in sectors linked to cross-border trade .

Furthermore, uncertainty surrounding U.S. trade policy has reduced household spending and business investment in Canada, creating a tense and volatile economic climate.

Carney has made it clear that one of the pillars of his foreign policy will be to reduce economic exposure to the United States and explore new strategic alliances, particularly in Asia and Europe. Trade agreements already exist with the European Union and Pacific Rim countries, but the challenge now will be to strengthen those ties to offset the loss of dynamic trade with its largest trading partner.

Although the road ahead will not be easy, internal and external pressure appears to give the prime minister room to maneuver to avoid a bad deal. His strategy seeks to defend economic sovereignty and national dignity, even if that means enduring short-term blows.

The growing tension between Canada and the United States over Trump's new tariffs marks a critical moment for Prime Minister Carney's economic policy. Far from giving in, Canada is committed to resisting with dignity, adapting to the USMCA, and diversifying its foreign trade. While the challenges are great, so are the opportunities to redefine Canada's place on the global stage. In this context, not giving in to a bad deal may be the best decision .