Canada Prepares Retaliatory Tariffs in Response to Trump’s Tariffs

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Canada Prepares Retaliatory Tariffs in Response to Trump’s Tariffs \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ President-elect Donald Trump’s threat to impose a 25% tariff on imports from Canada and Mexico has prompted Canada to prepare potential retaliatory measures. Canadian officials warn that such tariffs would harm both nations, given their deeply interconnected economies. Prime Minister Justin Trudeau is consulting provincial leaders, while Mexico is also drafting a response. Trump’s focus on curbing drugs and migration through trade restrictions has reignited fears of a trade war that could jeopardize key industries, including energy and automotive.

Trump’s Canada Tariff Threat: Quick Looks

Trump’s Proposal: A 25% tariff on all imports from Canada and Mexico to address border security concerns.
Canada’s Retaliation Plans: Officials are exploring targeted tariffs on politically sensitive U.S. goods.
Economic Impact: Canada is a critical supplier of energy, minerals, and goods to the U.S., with $2.7 billion in daily trade.
Border Data: Migration and drug trafficking numbers at the Canadian border are far lower than at the southern border.
Mexican Response: Mexico is also preparing retaliatory measures in case tariffs are implemented.
USMCA in Jeopardy: Trump’s tariff threats could undermine the North American trade agreement.

Deep Look

Trump’s Tariff Threats

President-elect Donald Trump’s proposal to impose a 25% tariff on imports from Canada and Mexico has raised significant concerns among Canada’s political and economic leaders. Trump justified the sweeping tariffs by citing the flow of drugs and migrants across both borders, linking his trade agenda to his broader “America First” policies on border security and immigration.

In his announcement, Trump said the tariffs would be among his first executive actions upon taking office, marking a dramatic escalation in trade tensions with the United States’ closest neighbors and largest trading partners.

Canada’s Response

A senior Canadian government official confirmed that Canada is considering retaliatory tariffs on U.S. goods should Trump follow through. While no decisions have been made, the official indicated that Canadian leaders are preparing for “every eventuality.”

Prime Minister Justin Trudeau has called an emergency virtual meeting with provincial leaders to strategize. Some premiers are urging Trudeau to negotiate a bilateral trade agreement with the U.S. that excludes Mexico, arguing that the two countries’ trade and border dynamics are distinct.

Retaliation History

Canada’s potential response mirrors its approach during Trump’s first term when he imposed tariffs on Canadian steel and aluminum. At that time, Canada retaliated with billions of dollars in duties on U.S. goods, strategically targeting items with political significance, such as yogurt from Wisconsin (home state of then-House Speaker Paul Ryan) and whiskey from Kentucky (home state of Senate leader Mitch McConnell).

This approach underscored the deep interconnectedness of U.S.-Canada trade and highlighted the potential for economic and political fallout if a trade war escalates.

Economic Ties at Stake

Canada’s economy is deeply intertwined with the U.S., making Trump’s tariff threat particularly concerning. Canada is the top export destination for 36 U.S. states, with daily cross-border trade valued at $3.6 billion Canadian ($2.7 billion USD). Key sectors include energy, manufacturing, and critical minerals.

Energy: Canada supplies 60% of U.S. crude oil imports and 85% of its electricity imports, making it essential to the U.S. energy supply chain.
Critical Minerals: Canada is the largest foreign supplier of 34 critical minerals and metals vital to U.S. national security, including uranium and rare earth elements.

Deputy Prime Minister Chrystia Freeland emphasized the interdependence between the two nations, stating, “Canada is essential to the United States’ domestic energy supply.”

Trump’s Energy Goals at Risk

Trump’s pledge to cut American energy bills in half within 18 months could be jeopardized by his tariff proposal. In 2023, Canadian oil accounted for nearly two-thirds of total U.S. oil imports and one-fifth of the overall U.S. oil supply. A 25% tariff on Canadian energy imports would likely increase costs for U.S. consumers and disrupt energy supply chains.

Border and Drug Claims

Trump’s justification for the tariffs centers on border security, including migration and drug trafficking. However, Canadian officials argue that their country’s border dynamics differ significantly from Mexico’s:

Migration: U.S. Border Patrol made 56,530 arrests at the southern border in October 2024 alone, compared to 23,721 arrests at the Canadian border over the past year.
Fentanyl Seizures: U.S. customs agents seized 21,100 pounds of fentanyl at the Mexican border in the last fiscal year, compared to just 43 pounds at the Canadian border.

Despite these stark differences, Canadian officials have expressed willingness to collaborate with the Trump administration to address any legitimate concerns.

Mexican Response

Mexico is also preparing retaliatory measures in response to Trump’s tariff threats. Mexican President Claudia Sheinbaum announced Wednesday that her administration is drafting a list of U.S. goods to target, should the tariffs be implemented.

Sheinbaum emphasized that while Mexico is committed to maintaining strong trade relations with the U.S., her government will act decisively to protect its economic interests.

Broader Implications

Trump’s tariff proposal risks undermining the United States-Mexico-Canada Agreement (USMCA), the trade deal that replaced NAFTA in 2020. The USMCA, which governs over $1.5 trillion in annual trade, is up for review in 2026. A renewed trade war could strain relations among the three nations and jeopardize the agreement’s future.

Additionally, Canadian officials are concerned about the potential for increased migration northward if Trump implements mass deportations from the U.S. Such a scenario could exacerbate challenges at the Canadian border and strain resources further.

The Path Forward

Trudeau’s emergency meeting with provincial leaders will likely focus on developing a unified strategy to address the looming trade conflict. While Canadian officials hope to avoid a tariff war, they are preparing for the possibility of significant economic disruption.

As Trump prepares to take office, his administration’s approach to trade and border security will be closely watched, with Canada and Mexico bracing for the potential fallout of his aggressive policies.