On Saturday, President Donald Trump escalated trade tensions by threatening to impose a 100% tariff on goods imported from Canada, contingent upon Canada's potential establishment of a trade deal with China. This development signals a further deterioration in relations between the US president and Canadian Prime Minister Mark Carney, following a series of exchanges involving threats of tariffs on Canadian products.
Previously, the Trump administration had threatened to levy duties as high as 10% on Canadian goods, criticism intensified after an advertising campaign in Ontario featured former President Ronald Reagan endorsing tariffs. In a rhetorical jab, President Trump referred to Carney as "governor," a nickname he also applied to former Prime Minister Justin Trudeau, referencing a suggestion that Canada might become the 51st US state.
In a post made on his social media platform Truth Social, Trump stated: "If Governor Carney thinks he is going to make Canada a 'Drop Off Port' for China to send goods and products into the United States, he is sorely mistaken. China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life." This warning underscores the administration’s perception of Canada’s potential role in facilitating Chinese exports into the US.
Notably, this stance contrasts with Trump's prior remarks from January 16, when he expressed support for Carney pursuing a trade agreement with China, stating, "It's a good thing for [Carney] to sign a trade deal. If you can get a deal with China, he should do that." This reversal highlights a shifting US approach towards Canada’s international trade initiatives.
Earlier in the month, Carney met Chinese President Xi Jinping on Chinese soil, where the two leaders agreed upon a "new strategic partnership." Part of this agreement involved Canada reducing tariffs on Chinese electric vehicles, allowing up to 49,000 Chinese electric vehicles to enter the Canadian market annually. Additionally, China is expected to lower tariff barriers on Canadian agricultural products such as canola seed, lobster, and peas later in the year.
However, the Trump administration has not clarified what specific terms or arrangements would constitute a "deal" warranting the imposition of the threatened 100% tariffs. Requests for comment from both the White House and the Canadian Prime Minister's Office were not immediately answered.
This latest threat from Trump comes shortly after Prime Minister Carney’s remarks at the World Economic Forum in Davos, Switzerland, where he emphasized economic integration as a weapon used by stronger nations. He highlighted the use of tariffs as leverage and supply chains as vulnerabilities open to exploitation. Although Carney did not explicitly name the United States, he characterized the current global situation as a "rupture" rather than a mere transition. He urged middle powers to collaborate, emphasizing that absence from strategic discussions risks being placed "on the menu."
The potential impact of 100% tariffs is ambiguous. Goods from Canada that meet the criteria under the United States-Mexico-Canada Agreement (USMCA) have been previously exempted from various tariffs implemented by President Trump. The USMCA, which Trump helped negotiate during his first term, is scheduled for review this year.
Nonetheless, existing sector-specific tariffs on Canadian exports such as automobiles, steel, aluminum, lumber, and energy products have already adversely affected Canada’s economy. For example, in October, Canada's unemployment rate rose to its highest level in nine years. The economic friction has also caused repercussive effects on the US economy due to consumer responses in Canada, including significant reductions in travel to the US by land and a steep decline in American spirits exports to Canada.
Specifically, Statistics Canada data shows that Canadian land travel to the US declined by 31% year-to-date through the end of September. Moreover, exports of American distilled spirits to Canada plummeted by 85% in the second quarter, according to the Distilled Spirits Council of the United States.
Trump’s announcement follows his recent vow to impose a 10% tariff on all goods from several European nations, including Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland, starting February 1 unless the US reached an agreement to acquire Greenland. However, he subsequently indicated that tariffs were unnecessary after reaching a framework agreement.
Observers note that Trump’s tariff threats often provoke uncertainty, with some investors dubbing such episodes as "TACO," or "Trump Always Chickens Out," owing to instances where announced policies do not materialize. Adding to this uncertainty, the US Supreme Court is expected to soon rule on whether the president possesses the legal authority under the International Emergency Economic Powers Act to impose tariffs, a law that makes no explicit mention of tariffs. The justices have reportedly expressed skepticism about the administration’s application of this statute.
The exchange of contentious remarks between the two leaders has continued. At the World Economic Forum, Trump stated, "Canada lives because of the United States. Remember that, Mark, the next time you make your statements." In response, Carney asserted, "Canada doesn’t live because of the United States. Canada thrives because we are Canadian." These statements underscore the escalating tensions surrounding trade and diplomatic relations.
As this situation evolves, the ramifications for cross-border trade, economic stability, and political relations remain uncertain. Both the impending tariff measures and broader strategic decisions will merit close observation given their potential impact on North American commerce and global economic alignments.