Canada To Exchanges U.S. Oil Exports With China: Will Trump Impose More Tariffs?

The United States and Canada are now in a serious trade conflict that has changed the way both countries do business and interact with each other. On February 1, 2025, President Trump announced a new tariff policy that put a 25% tax on almost all products coming from Canada. The only exception was for energy products, which were taxed at a lower rate of 10%. At the same time, a similar 25% tariff was applied to goods coming from Mexico. The administration said that these tariffs were needed for national security and were based on a law called the International Emergency Economic Powers Act (IEEPA). This law had never been used before to set tariffs, and using it allowed the government to avoid the usual ways of solving trade disputes that are part of the United States-Mexico-Canada Agreement (USMCA). Even though the official reason for the tariffs was to help stop illegal immigration and the flow of fentanyl—a dangerous opioid that, according to U.S. reports, causes around 75,000 deaths each year—the facts did not support these claims. Most of the deaths from fentanyl were linked to Mexican drug cartels, not to any illegal activities from Canada.

Canada responded quickly and strongly. Prime Minister Trudeau announced a series of countermeasures to protect Canada’s economy and to push back against what many saw as economic bullying by the United States. Starting on February 4, Canada put a 25% tariff on a selected group of U.S. products that were worth about $30 billion. This group of products included items like bourbon, home appliances, and clothing. After a 21-day consultation with industry experts, the list was expanded to include goods worth a total of $155 billion. These new tariffs targeted not only consumer products but also important agricultural items such as dairy and poultry, as well as industrial products like steel and machinery. This approach was very similar to the tactics used by the Trump administration during previous trade disputes in 2018, and it showed that both sides were becoming much more stubborn in their positions.

As tensions grew, a temporary break came on February 3. Negotiators agreed to delay the new tariffs for 30 days. In return, Canada promised to spend $1.3 billion on better border security. This money was used to create a joint strike force with the United States that would work to stop drug trafficking. Canada also planned to send 10,000 personnel to monitor its northern border, and a special official known as a Fentanyl Czar was appointed to focus on fighting the drug trade. At the same time, Mexico also agreed to a pause by sending 10,000 troops to secure its northern border. This 30-day pause helped keep prices stable for a short time, stopping sudden price hikes on important materials like lumber, aluminum, and auto parts, which are very important for U.S. industries. However, this short break was not enough to calm everything. On February 4, China added its own twist by putting a 10% tariff on U.S. goods such as coal and liquefied natural gas. This added even more pressure to an already tense international trade scene.