Trump Threatens Trade Deal Over Canada’s Recognition of Palestinian State

Former U.S. President Donald Trump issued a sharp warning on July 31, 2025, stating that Canada’s decision to back Palestinian statehood could derail ongoing U.S.–Canada trade negotiations. Trump declared that because of Prime Minister Mark Carney’s announcement, “it will be very hard for us to make a Trade Deal with them.” He added that if no agreement is reached by the U.S. deadline of August 1, a sweeping 35% tariff will be levied on all Canadian goods not protected under the existing USMCA trade framework.
Carney’s announcement included Canada’s intention to formally recognize the State of Palestine at the United Nations General Assembly in September, aligning the country with recent declarations from France and the UK. However, Canadian recognition is conditional: the Palestinian Authority must implement democratic reforms, hold inclusive general elections in 2026 excluding Hamas participation, and commit to demilitarization.
Carney justified the move by citing the deepening humanitarian crisis in Gaza, saying the ongoing civilian suffering left no room for delay in international action supporting peace and a viable two state solution. Israel swiftly condemned Canada’s decision, warning that legitimizing statehood without accountable governance would reward terrorism and undermine hostage negotiations.
Trump’s reaction underscores a broader strategy of using trade policy as leverage on foreign policy issues. While he expressed ambivalence or quiet dismissal regarding similar recognition moves by the UK and France, he took a harder stance on Canada—reflecting both his long-standing antagonism toward Ottawa and a pattern of brokering trade threats tied to unrelated diplomatic developments.
As the August 1 deadline looms, trade talks remain unresolved, spanning issues beyond tariffs and commerce, including defense, security investments, and other bilateral concerns. Canada has indicated it will not accept a bad deal even under looming tariff pressure, while U.S. negotiators have signaled that lack of progress may trigger punitive measures.
Source- BBC News, AP News, The Guardian