Canadian Prime Minister Mark Carney has vowed not to settle for an unfavorable trade deal with the United States, as a looming August 1 deadline threatens to trigger steep US tariffs on Canadian goods.

“Our objective is not to reach a deal whatever it costs,” Carney told reporters in Ontario on Tuesday. “We are pursuing a deal that will be in the best interest of Canadians.”

If no agreement is reached by the deadline, US imports from Canada will face a 35% tariff, a move that could significantly disrupt trade between the two nations, which are among each other’s top trading partners.

The standoff follows US President Donald Trump’s return to the White House and his renewed push for protectionist economic policies, including a wide-ranging tariff regime. Trump argues the measures will revitalize American manufacturing and safeguard domestic jobs. However, critics warn the strategy could backfire, driving up prices for US consumers and straining ties with key allies.

The US has already slapped a 25% tariff on select Canadian goods, along with a 50% duty on aluminium and steel imports. In response, Carney hinted at new countermeasures, saying Canada may step in to protect key sectors like aluminium and lumber, and that additional support may be required in the coming months.

Canada has previously retaliated with its own tariffs, including higher duties on steel imports.

The economic stakes are high. Canada exports about 75% of its goods to the US, including oil, vehicles, machinery, food, and pharmaceuticals. In 2024, the US exported goods worth nearly $350 billion to Canada and imported over $412 billion, according to the Office of the US Trade Representative.

Trump has defended his tariff policy as necessary to fix what he calls unfair trade practices. He has also linked tariffs to efforts to curb illegal fentanyl shipments into the US though data shows just 0.2% of fentanyl seizures occur at the Canadian border, with nearly all intercepted at the US-Mexico border.

Despite launching multiple tariff battles, Trump has reached deals with several countries, including the UK, Japan, and Indonesia—though many of those agreements retain elevated tariffs.

Most recently, the White House struck a deal with the Philippines that includes a 19% tariff on imports—slightly lower than the 20% Trump had threatened, but higher than the original 17% proposal.

As the deadline approaches, tensions remain high, with both Ottawa and Washington bracing for possible escalation.