Money, drugs, and a very long fence. That's the short answer. But if you’ve been watching the news lately, you know the "short answer" rarely covers the chaos of North American trade.
Donald Trump didn't just wake up and decide to tax maple syrup for the fun of it. The 2025 tariff saga, which saw a 25% blanket tax slapped on Canadian imports (with a smaller 10% hit on energy), was a massive shock to the system. It wasn't just a "business as usual" trade dispute. It was a high-stakes leverage play that used the economy as a hammer to crack open issues that had nothing to do with the price of lumber.
If you're wondering why Trump put tariffs on Canada, it’s because he saw the northern border as a back door for things he didn’t like—specifically fentanyl and illegal immigration.
The Border Crisis That Canada Didn't See Coming
For decades, the U.S.-Canada border was the "quiet one." While the southern border dominated the headlines, the northern line was mostly just a long stretch of trees and occasional duty-free shops. Trump changed that narrative almost overnight.
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He argued that Canada wasn't doing enough to stop the flow of illicit drugs. Specifically, fentanyl. According to the White House, the "failure of Canada to do more" to address drug trafficking constituted a national emergency. It sounds intense because it was. Even though U.S. Customs and Border Protection (CBP) data showed that the vast majority of fentanyl seizures happen at the southern border, the Trump administration pointed to a rising trend in the north as justification.
The logic was simple: If you don't secure your side of the fence, we're going to tax every single thing that comes through the gate.
It Wasn't Just About Drugs
While fentanyl was the lead singer in this political rock band, there were plenty of backup vocalists. The administration had three main "asks" or "gripes" that fueled the fire:
- Illegal Immigration: There was a noted increase in non-citizens crossing into the U.S. from Canada. Trump called it an "invasion" and used the 25% tariff as a way to force then-Prime Minister Justin Trudeau to step up enforcement.
- The Trade Deficit: Trump has a long-standing, well-documented hatred for trade deficits. He views them as "losing" a game of Monopoly. By late 2024, the U.S. trade deficit with Canada was around $55 billion. He wanted that number at zero, or better yet, in the plus column.
- Domestic Manufacturing: By making Canadian goods 25% more expensive, the goal was to make "Made in America" look like a bargain.
How the 2025 Trade War Actually Played Out
Things moved fast. On February 1, 2025, the orders were signed. It wasn't a gradual rollout; it was a "pay up starting now" situation.
Canada didn't just sit there and take it. Justin Trudeau, and later his successor Mark Carney, called the move "unjustified" and a violation of the USMCA (the trade deal that replaced NAFTA). Canada responded with its own $30 billion list of retaliatory tariffs. They targeted things that hurt: orange juice, peanut butter, whiskey, and steel.
It was a classic "eye for an eye" that left consumers on both sides of the border paying $5 for a loaf of bread that used to cost $3.50.
The Energy Exception (Sorta)
There was one area where the U.S. had to be careful: oil. The U.S. gets about 60% of its imported oil from Canada. If Trump had put a 25% tariff on Canadian crude, gas prices at American pumps would have gone through the roof instantly.
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Instead, he put a 10% tariff on energy. It was a "we're still mad at you, but we still need your oil" tax. Even so, it added a layer of cost to an already stressed energy market, proving that even a "strategic" tariff has collateral damage.
Why the USMCA Didn't Stop It
You'd think a free trade agreement would prevent this kind of thing. After all, that's what the "free" in free trade is supposed to mean.
However, Trump utilized a specific legal loophole: Section 232 of the Trade Expansion Act and the International Emergency Economic Powers Act (IEEPA). By declaring the border situation a "national emergency" and a "national security threat," the President was able to bypass the usual USMCA rules.
Basically, if the President says it's an emergency, the trade rules go out the window until a court says otherwise.
The Fallout: Who Actually Paid?
Here’s the part most people get wrong. Trump often says that "Canada pays the tariff." That's not how it works. A tariff is a tax paid by the American company importing the goods to the U.S. government.
When a 25% tariff hits Canadian steel, the American construction company buying that steel pays the 25% extra. To stay in business, they pass that cost on to you. That's why your new house or your new car got more expensive in 2025.
- Job Losses: Economists estimated that the trade war put over 400,000 U.S. jobs at risk due to supply chain disruptions.
- Price Hikes: Everything from coffee to car parts saw a "tariff surcharge."
- Investment Freeze: Companies hate uncertainty. Many businesses stopped hiring or building new factories because they didn't know if the tariffs would last a week or a decade.
What’s the Situation Now in 2026?
As of early 2026, the dust is starting to settle, but the landscape has changed forever. Canada has begun aggressively looking for other friends. Prime Minister Mark Carney has been visiting Beijing and European capitals, trying to "de-risk" from the United States.
Canada's goal is to double its non-American exports in the next decade. They’ve realized that being the "best friend" of the U.S. doesn't mean you're safe from the "America First" agenda.
Actionable Insights for Businesses and Consumers
If you're trying to navigate this post-tariff world, here's what you need to do:
- Audit Your Supply Chain: If you're a business owner, you need to know exactly how much of your product comes from Canada. Even "American-made" cars often have Canadian-made engines or parts.
- Watch the Supreme Court: There are several ongoing cases challenging the use of the IEEPA for tariffs. If the court rules against the administration, companies could be looking at massive refunds for duties already paid.
- Diversify Sources: Don't put all your eggs in one basket. Whether you're buying lumber or tech services, having a secondary source outside of the USMCA zone is no longer optional—it's a survival strategy.
- Hedge for 2026 Review: The USMCA is scheduled for a mandatory "joint review" on July 1, 2026. Expect more fireworks and potentially more tariff threats as that date approaches.
The reality is that why Trump put tariffs on Canada wasn't really about trade math. It was about using the biggest economic engine in the world to force a neighbor to change its domestic policies. Whether it worked is still up for debate, but the receipts—in the form of higher prices—are definitely in our pockets.