TMTPOST -- U.S. President Donald Trump has signed an executive order increasing tariffs on Canadian goods from 25% to 35%, effective Friday. The move follows months of escalating trade tensions between the two countries.

According to the order, the tariff hike stems from what the Trump administration describes as “Canada’s lack of cooperation in curbing the flow of fentanyl and other illicit drugs across the northern border.” It also cites Canada’s retaliation against previous U.S. trade actions.

However, goods that comply with the Canada-U.S.-Mexico Agreement (CUSMA) will be exempt, meaning most Canadian exports can still enter the U.S. without tariffs.

In a separate executive order issued Thursday, Trump imposed new blanket tariff rates—ranging from 15% to 41%—on imports from dozens of other countries.

Mexico was granted a 90-day extension on its current tariff regime following a conversation between Trump and Mexican President Claudia Sheinbaum. This comes despite Trump’s earlier threats to raise Mexico’s rates starting Friday.

Speaking to NBC News Thursday evening, Trump said he was open to further negotiations with Canada and might speak with Canadian Prime Minister Mark Carney later that night.

When asked by reporters whether Canada’s recent announcement recognizing a Palestinian state could jeopardize trade talks, Trump replied: “I didn’t like what they said, but you know, that’s their opinion. Not a deal-breaker. But we haven’t spoken to Canada today. He’s called and we’ll see.”

"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," Trump had said in a post on Truth Social earlier.

Reaction from Canadian political leaders was swift. Conservative Leader Pierre Poilievre called the tariffs “unjustified” in a post on X (formerly Twitter), and urged for a return to tariff-free trade.

“That means zero tariffs on our steel, aluminum, softwood, autos, energy, agriculture and everything else,” Poilievre wrote. “That is the deal Canada had before and the Prime Minister should accept nothing short of that.”

Doug Ford, the premier of Canada's manufacturing powerhouse Ontario, also weighed in. He called the tariff hike “concerning” and urged the federal government to respond with 50% tariffs on U.S. steel and aluminum.

“Canada shouldn’t settle for anything less than the right deal,” Ford posted on X. “Now is not the time to roll over. We need to stand our ground.”

Canada is the second-largest trading partner of the U.S. after Mexico and the largest purchaser of U.S. exports, buying $349.4 billion in American goods last year while exporting $412.7 billion to the U.S., according to U.S. Census Bureau data.

Canada also supplies the U.S. with most of its imported steel and aluminum, which are currently subject to U.S. tariffs, along with Canadian vehicle exports.

Last month, Canada abandoned plans for a digital services tax aimed at U.S. tech companies after Trump abruptly withdrew from trade talks, calling the tax a "blatant attack."