August 1, 2025, would be marked as a watershed moment in the bilateral relations between two strong neighbors—Canada and the United States. 

While the US President Donald Trump has announced to increase the tariffs on those Canadian exports that are not covered under one of the world’s second largest free trade agreements—the Canada-United States-Mexico Agreement (CUSMA)—from 25 percent to 35 percent, the Canadian Prime Minister, Mark Carney, in a statement issued shortly after midnight, has not only expressed his government’s disappointment over the US move but has also firmly reiterated his country’s commitment to be its own best customer.

Canada’s refusal to bow to tariff diktats has come after the federal and provincial governments have generally, by cutting across their political affiliations, come together to fight the US tariffs unitedly.

This is the second major action of the Carney government after it decided to recognize Palestine, which appears to have prompted the US president to issue an executive order on Thursday night imposing heavier tariffs on Canadian imports.

In his statement, PM Carney made it clear that while Canada would continue to negotiate with the USA on “our trading relationship, the Canadian government is less focused on what we can control, building Canada strong. The federal government, provinces, and territories are working together to cut down trade barriers to build one Canadian economy. We are developing a series of major nation-building projects with provincial, territorial, and indigenous partners. Together, these initiatives have the potential to catalyze over half a trillion dollars of new investments in Canada.

“Canadians will be our own best customers, creating more well-paying careers at home, as we strengthen and diversify our trading partnerships throughout the world. We can give ourselves more than any foreign government can ever take away by building with Canadian workers and by using Canadian resources to benefit all Canadians,” PM Carney said in his statement.

The statement has evoked mixed reactions from various quarters in Canada. Most of the critics of the new Liberal government have lauded PM Carney for his bold stand by hailing his statement. Of late, Canada has been gradually moving away from the shadow of the US on various contentious and important issues, including its defense build-up and its fast-growing friendly policies towards the European Union.

The Prime Minister’s statement also says that “the US application of CUSMA means that the US average tariff rate on Canadian goods remains one of its lowest for all its trading partners. Other sectors of our economy—including lumber, steel, aluminum, and automobiles—our export markets are, however, heavily impacted by US duties and tariffs. For such sectors, the Canadian government will act to protect Canadian jobs, invest in our industrial competitiveness, buy Canadian, and diversify our export markets.

While reacting to the US president’s allegation that Canada has done little to check the smuggling of fentanyl across the borders, PM Carney’s statement noted, “The United States has justified its most recent trade action based on the cross-border flow of fentanyl, even though Canada accounts for only 1 percent of the US fentanyl imports and has been working intensely to further reduce these volumes.” 

It added, “Canada’s government is making historic investments in border security to arrest drug traffickers, take down transnational gangs, and end migrant smuggling. These include thousands of new law enforcement and border security officers, aerial surveillance, intelligence and security operations, and the strongest border legislation in our history. We will continue working with the United States to stop the scourge of fentanyl and save lives in both countries.”

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