Key Points
- The U.S. raised tariffs on non-USMCA-compliant Canadian goods from 25% to 35%.
- A 40% penalty was added to stop companies from shipping goods through other countries to avoid the tariffs.
- The Trump administration cited Canada’s failure to stop fentanyl trafficking as the reason.
- Canadian Prime Minister Justin Trudeau expressed disappointment but still wants to negotiate.
U.S. President Donald Trump announced new tariffs on Canada Friday, sending stock markets on both sides of the border into a slide. The move escalates trade tensions and has investors worried about the economic fallout.
The new rules raise tariffs on Canadian goods from 25% to 35%. This increase affects any items that do not comply with the U.S.-Mexico-Canada Agreement (USMCA). To stop companies from dodging the new fees, the Trump administration also introduced a steep 40% “transshipment duty” on any goods sent through a third country to get to the U.S.
The White House justified the tariff hike by blaming Canada for failing to stop the flow of the illegal drug fentanyl into the United States.
Canadian Prime Minister Justin Trudeau said he was disappointed with the decision. He had tried to contact Trump to discuss the issue, but no talks took place. Despite the setback, Trudeau stated that Canada will continue to seek negotiations with the U.S.
The news immediately hit financial markets. In Canada, the main S&P/TSX index in Toronto dropped by more than 0.40% or −110.18 to 27,259.78. In the U.S., stock futures fell sharply, with the Dow Jones, S&P 500, and Nasdaq all pointing to a significant drop.
This market anxiety overshadowed recent strong earnings reports from tech giants like Meta and Microsoft, showing just how worried investors are about the impact of a renewed trade dispute.
