U.S. President Donald Trump has intensified a growing diplomatic row with Canada, announcing a 35 percent tariff on Canadian exports not covered by the U.S.–Mexico–Canada Agreement (USMCA). The move comes in response to Canada’s plan to officially recognize the State of Palestine.

Trump, writing on his social media platform Truth Social, said: “Wow! Canada has just announced that it is backing statehood for Palestine. That will make it very hard for us to make a Trade Deal with them.”

The White House said the tariffs would take effect if no new bilateral deal is reached by August 1. The move threatens to disrupt trade with one of America’s largest economic partners. Last year, Canada exported over $412 billion worth of goods to the U.S. and imported $349 billion in return.

Canadian Prime Minister Mark Carney previously described the negotiations as “constructive,” but admitted on Monday that a deal before the deadline was unlikely. Canada has not yet responded officially to the tariff threat, but government insiders suggest the country may retaliate if the duties are enforced.

Canada joins a growing number of countries, including France and the United Kingdom, in recognizing Palestinian statehood amid renewed international momentum. The decision has drawn sharp criticism from Washington, where Trump and senior officials have warned of “serious consequences” for countries taking such a stance.

Economists have raised concerns that the tariffs could disrupt cross-border supply chains, particularly in the steel, aluminum, and automotive sectors. Canadian stock markets opened higher on Wednesday due to strong tech earnings but showed signs of volatility following the tariff announcement.