Trump's New Tariffs on Canada: Key Things to Know

President Donald Trump ratcheted up tariff measures against Canada late Thursday, intensifying tensions tensions with a leading U.S. trading partner as both parties work to finalize a trade deal by the end of the month.

The Dow Jones Industrial Average dropped 250 points, equivalent to 0.5%, during initial trading on Friday, reversing part of the index's recent weekly increases as it neared an all-time peak. The S&P 500 declined by 0.4%, whereas the technology-focused Nasdaq experienced a decrease of 0.2%.

Canadian Prime Minister Mark Carney adopted a strong yet balanced approach in his statement released late Thursday evening, expressing his views on... X That Canada would keep engaging in trade discussions while safeguarding its country's interests.

FURTHER READING: Coffee, footwear – New tariffs imposed by Trump may increase costs for these items

Here's what you should be aware of regarding the latest U.S. tariffs imposed on Canada, and how these affect the tense economic relationship between the two allied nations:

When will the newly announced tariffs by Trump on Canada come into force?

A new set of 35% taxes on Canadian products will come into force on August 1, aligning with the beginning of similar duties. issued more than 20 additional nations in the past few days.

August 1 is also the date when current trade discussions between the United States and Canada must conclude.

Canada already faces 25% tariffs on exports to the U.S., though those levies exclude a host of goods compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.

Donald Trump warned he would increase tariffs above 35% if Canada decides to impose taxes on American products.

Canadian products may also face industry-related taxes, including 50% charges on steel and aluminum, along with 25% duties on vehicles and automotive components not meeting USMCA standards.

What was the reason behind Trump's suggestion of additional taxes on Canada?

Trump provided two explanations for the new set of tariffs, which correspond to complaints he has raised in earlier trade statements directed at Canada.

Initially, Trump criticized Canada for reportedly not preventing the movement of fentanyl into the United States.

"As you may remember, the United States placed tariffs on Canada to address our country's fentanyl epidemic, which has been partly fueled by Canada's inability to prevent these substances from entering our nation," Trump stated in a letter to Carney, which was shared on social media late Thursday.

From September until April, almost all fentanyl intercepted by the U.S. arrived via the southern boundary with Mexico, as reported by the U.S. Customs and Border Protection, also known as CBP. Only less than 1% of the fentanyl was detected along the northern frontier with Canada, according to CBP findings.

Then, Trump strongly condemned the tariffs and additional trade restrictions imposed by Canada, which placed American companies at a disadvantage as they attempt to access Canadian consumers. These obstacles, according to Trump in the letter, have led to a trade imbalance between the United States and Canada.

Last year, the United States had a trade gap with Canada amounting to $63 billion, representing a small decline compared to the prior year, as reported by the U.S. Trade Representative's Office . In contrast, the U.S. had a bigger trade shortfall last year compared to its major trading allies: a $295 billion gap with China and a $171 billion imbalance with Mexico.

What was Canada's reaction to Trump's latest tax increases?

Carney shared an 114-word reply on X late Thursday that seemed to prevent additional intensification of trade disputes while maintaining a strong stance to protect Canada's economic concerns.

During the ongoing trade discussions with the United States, the Canadian government has consistently supported our workers and companies," Carney stated. "We remain committed to this effort as we move forward toward the updated deadline of August 1.

Carney directly addressed Trump's claims regarding Canada's inability to tackle fentanyl, stating that Canada has "achieved significant progress in combating the fentanyl crisis across North America."

MORE: Live updates from the Trump administration: Trump unveils 35% taxes on Canadian goods

Carney added, 'We remain dedicated to working alongside the United States to preserve lives and safeguard communities in both of our nations.'

Reciprocal statements made by Trump and Carney come after an interruption in trade discussions at the end of last month, when Trump halted conversations due to Canada's proposed Digital Services Tax, which aimed to charge a 3% fee on American tech firms. Discussions were restarted shortly afterward once Canada scrapped the tax proposal.

Canada previously retaliated Opposing tariffs through taxes on American products, imposing tariffs on $20.7 billion worth of items in March along with 25% duties on automobiles not complying with USMCA standards in April. As of early Friday, Canada has yet to announce an additional set of counter-tariffs in reaction to the most recent charges.

On Thursday, Carney mentioned in a social media update that Canada has been pursuing trade deals with various nations to strengthen its economic position.

"Canada is becoming stronger," Carney stated.