Tensions between the U.S. and Canada are escalating after President Donald Trump linked trade talks to Ottawa’s recognition of Palestinian statehood, threatening steep new tariffs if no deal is reached by 1 August.
Trump is set to impose a 35% tariff on all Canadian goods not covered by the U.S.-Mexico-Canada trade agreement if the two countries do not reach an agreement by the deadline.
The warning comes after Canada expressed support for Palestinian statehood, a move Trump called a major obstacle 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," Trump posted on Truth Social.
Canadian Prime Minister Mark Carney had earlier described tariff negotiations as 'constructive' but acknowledged that a final deal may not be achieved before the deadline.
Canada remains the second-largest U.S. trading partner and its top buyer of exports, purchasing $349.4 billion in U.S. goods last year. However, it continues to face tariffs on steel, aluminium, and vehicle exports.
In a move seen as an olive branch last month, Canada dropped its digital services tax targeting U.S. tech firms. Still, Trump had already walked away from trade talks, labeling the tax a "blatant attack."
Carney joined France and Britain this week in declaring plans to recognize a Palestinian state at an upcoming United Nations meeting in September, citing the dire humanitarian crisis in Gaza.
“Canada condemns the fact that the Israeli government has allowed a catastrophe to unfold in Gaza,” Carney said.
Both the U.S. and Israel criticized his remarks. Carney’s office has not responded to Trump’s latest comments.
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