Trump plans to impose 50 percent tariffs on Canadian goods – this is his revenge for American cars, alcohol and cheese.

On July 20, US President Donald Trump announced the imposition of 50% tariffs on most Canadian goods. He believes Ottawa is pursuing unfair policies toward American automobiles, alcohol, and dairy products, according to Associated Press.

This move could trigger a new wave of economic instability, raising the risk of accelerating inflation and further deterioration in relations between the two countries, which were closely linked economically before Trump's return to the White House. An administration official who briefed reporters on the decision in advance noted that Canada was one of the few countries, other than China, to retaliate against Trump's previous tariffs, and it must bear responsibility for that.

An official, speaking on condition of anonymity, said the president signed three proclamations triggering tariffs under Section 338 of the Trade Act of 1930. Several Democratic lawmakers last year proposed repealing that section, arguing that Trump could use it to destabilize the economy.

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The new 50% tariffs will not affect energy products, potash fertilizers, fish, or critical minerals, but will apply to goods previously exempt from import duties under the United States-Mexico-Canada Agreement (UMCA). This 2020 trade agreement was not renewed by the United States, leading to a new round of negotiations that could extend until 2036.

The White House announced that the tariffs would take effect in 30 days, leaving time for potential negotiations once again, as Trump has previously failed to implement announced measures to increase import taxes.

Canadian Prime Minister Mark Carney stated that his government is committed to the principles of "free and fair trade" and has already concluded "more than 20 new economic and defense partnerships." He emphasized that Ottawa is ready to negotiate with the Trump administration.

"This trade dispute has already increased costs for families, particularly in the United States," Carney said. "Canada is prepared to engage in intensive negotiations to resolve the remaining issues with the United States in the interests of the citizens of both countries."

Canada risks facing a wider trade war

The imposition of tariffs could escalate into a full-scale trade war as Canada seeks to protect its economy. Ontario Premier Doug Ford warned of a possible escalation.

"If these tariffs go into effect, Canada must match them, tariff for tariff, dollar for dollar," Ford wrote on social media.

Canadian Chamber of Commerce President Candice Laing called the Trump administration's actions "unfortunate," but stressed that both sides needed to use the 30-day period before the measures came into effect to "make tangible progress in formal negotiations."

Chris Swonger, head of the Distilled Spirits Council of the United States, also called for an agreement: "We urge policymakers on both sides of the border to find a negotiated solution that restores market access for American alcohol and avoids further harm to the U.S. hospitality industry."

However, applying the Great Depression-era law broadens the risks: such tariffs could be imposed not only on Canada but also on other US trading partners, creating "enormous uncertainty" for the global economy, said Scott Lincicome, vice president of general economic affairs at the Cato Institute.

"We've crossed the Rubicon," Lincicome stated. "Using Section 338 is the nuclear version of Trump's tariff policy."

Tariffs become a political challenge for Trump

The new measures pose serious political and economic risks for Trump ahead of the November midterm congressional elections. Last April, his "Emancipation Day tariffs" caused a financial market crash amid inflation and recession fears, forcing him to temporarily cut rates for the sake of negotiations.

In February, the Supreme Court ruled that Trump lacked the legal authority to impose tariffs when he declared an economic emergency. This forced the administration to seek alternative legal mechanisms to increase import duties.

Tariffs are taxes on imports that companies can pass on to consumers through higher prices. The president claims that the costs of tariffs will force production to return to the United States, but economic data provides little support for this position.

"These new taxes will drive up prices for American families and likely trigger retaliation against the very industries Trump claims to be protecting," said Representative Suzanne DelBene, chair of the Democratic Congressional Campaign Committee.

The latest import tax hikes could exacerbate Trump's weak economic policy assessments. During the campaign, he promised to lower prices, but annual inflation has risen since he took office, as tariffs and the war in Iran are driving up oil prices.

Trump has repeatedly made trade claims against Canada.

An administration spokesperson reported that the president has ordered a study to investigate the possibility of imposing additional tariffs on Canada, as wildfires there are deteriorating air quality in the United States. He has previously made similar threats publicly on social media.

On July 19, Trump watched the World Cup final with Carney. According to an administration spokesperson, their joint presence in the stands was not a working meeting discussing trade and tariffs.

In the proclamations he signed, Trump claims that Canada discriminates against American cars, alcohol, and cheese compared to other countries. His arguments rely heavily on Ottawa's retaliatory measures after the US president imposed tariffs on Canada, arguing that it must more actively combat fentanyl smuggling.

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In a proclamation targeting the auto industry, Trump said Canada would maintain a 25 percent tariff on U.S. imports of vehicles that are not eligible for preferential treatment under the U.S.-Mexico-Canada Agreement beginning in April 2025.

In addition, the White House stated that, with regard to alcohol, all but two of Canada's provinces and territories have stopped purchasing and selling American alcoholic beverages since last year—this was also a response to Trump's tariffs and his statements about the possibility of Canada becoming the 51st US state.

Trump has long criticized Canada's policy on American cheese, claiming that Ottawa discriminates against the United States compared to Europe in the dairy market.

Relations between Trump and Carney remain tense. During his campaign, former central bank governor Carney promised to act "tough" to protect Canada's interests.

In January, at the World Economic Forum in Davos, Carney, without naming Trump directly, said that the "most powerful" countries use economics as a tool to pressure weaker states.

Trump then responded: "Canada exists because of the United States."

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