U.S. President Donald Trump escalated the trade war with Canada, saying it would be "very hard" to reach a trade deal ahead of the August 1 deadline. He cited Canada's decision to recognize the State of Palestine as the reason.
If the two sides fail to reach an agreement by the deadline, the U.S. will impose a 35% tariff on all Canadian goods not covered under the U.S.-Mexico-Canada trade agreement.
“Wow! Canada has recognized the State of Palestine. That makes it harder to make a trade deal with them,” Trump wrote on Truth Social.
Canada is a key U.S. trade partner
Canada is the U.S.'s second-largest trading partner after Mexico. In 2024, the U.S. exported $349.4 billion worth of goods to Canada and imported $412.7 billion. Canada is also the largest supplier of steel and aluminum to the U.S.
In July, Canada canceled a proposed digital services tax targeting U.S. tech giants. Trump called it a “blatant attack” and halted talks.
On July 30, Carney announced that his country would recognize the State of Palestine. He said the decision would be formalized at the UN meeting in September. Carney drew attention to famine and the humanitarian crisis in Gaza.
