OTTAWA (Reuters) -The Canadian team working on a trade deal with the United States could walk away from talks in the wake of a U.S. decision to impose a 35% tariff on some goods from Canada, an adviser to Prime Minister Mark Carney said on Friday.

Trump’s tariff hike still hits goods that are not covered by the USMCA. The Bank of Canada forecast this week that up to 95 percent of Canadian exports could qualify for exemptions under that agreement. Meanwhile, the share of Canadian companies claiming tariff exemptions has soared.

Trump has justified tariffs on goods from Canada, the top U.S. export market, by accusing it of failing to stop the cross-border flow of fentanyl, even though U.S. government data shows Canada accounts for only 1% of the fentanyl that enters the United States.