What does Donald Trump really want from Canada?
Be policy ready. Sign up for PPF’s weekly newsletters.
Figuring out Trump
Trying to figure out exactly what Donald Trump wants from Canada has become a full-time job for Canadian politicians charting a strategy to push back against the new president’s threat to impose stiff tariffs on imports.
When Trump first raised the prospect of a 25-percent tariff on imports from Canada and Mexico in November he complained that both countries were allowing migrants and illegal drugs, specifically fentanyl, to flow across their borders with the United States. Since then, however, he has cited the U.S. trade deficit with Canada and this country’s low military spending to claim that Washington is “subsidizing” Canada to the tune of $100 billion a year.
This week the waters were muddied even more. The Wall Street Journal reported that Trump is using the tariff threat to push for an early renegotiation of the North American trade deal, known as USMCA in the U.S. and CUSMA in Canada. In particular, The Journal wrote, Trump is “focused on using the threat of tariffs to change automotive rules under the continental trade pact, forcing car plants to move from Canada and Mexico back to the U.S.”
If true, that would suggest Canada faces tariffs no matter what it does to address Trump’s concerns about the border. Trump further complicated the issue by telling reporters after his inauguration that he intends to impose 25-percent tariffs on both Canada and Mexico very soon. “We’re thinking in terms of 25 percent on Mexico and Canada, because they’re allowing vast numbers of people” into the country, Trump said. “I think we’ll do it Feb. 1.”
That contradicts a sweeping executive order he signed earlier the same day, which directs the U.S. Trade Representative and other cabinet officers to address “unfair and unbalanced” trade with other countries. In particular, Trump ordered them to review the trade agreement with Canada and Mexico and to “make recommendations regarding the United States’ participation in the agreement.” The order says they must make those recommendations by April 1.
MORE FROM PPF: What are tariffs and what do they mean for Canada?
Trump also pushed back against The Journal report linking the tariff threat to renegotiating the USMCA/CUSMA. “It has nothing to do with that,” he said, pointing instead to the border issues he raised in the first place. Canada and Mexico, Trump went on, have “allowed millions and millions of people to come into our country that shouldn’t be here. They could have stopped them and they didn’t.”
The flurry of seemingly contradictory statements has left Canadian leaders scratching their heads about what exactly the president is after — and therefore what they could do to avoid tariffs. “The one thing we’ve learned is that President Trump — at moments — can be unpredictable,” Finance Minister Dominic LeBlanc said during a cabinet retreat at Montebello, Que.
Team Canada cracks
Prime Minister Justin Trudeau and others have promised a “Team Canada” approach to dealing with Donald Trump’s tariff threats, but divisions over how to respond became more apparent this week.
Trudeau said Canada will have a “robust, rapid” and “very strong” response if Trump does go ahead with tariffs on Canadian products. Federal officials have drawn up a plan to impose immediate tariffs on $37 billion worth of U.S. goods if Trump moves against Canada; that would rise to $110 billion if the president does not back down.
Trudeau said Canada could go even further. “Everything is on the table, and I support the principle of dollar-for-dollar matching tariffs,” he said. “It’s something we’re absolutely going to be looking at if they move forward. We are prepared for every possible scenario.”
Some other premiers, including Ontario’s Doug Ford, are backing the principle of dollar-for-dollar retaliation. After a virtual meeting involving all first ministers, Ford said he agrees with Trudeau about matching any U.S. tariffs. “As I said to the premiers, you can’t bring a knife to a gun fight,” said Ford. “Usually the guy with a knife loses in a gun fight.”
But not all premiers agree. Alberta’s Danielle Smith said Canada should not be talking publicly about retaliation. She said Canada cannot win a trade war because its economy is so much smaller than the American one. “We are far more reliant on the trade relationship with them than they are on us,” she said this week. “And so trying a tit-for-tat tariff war, without addressing the underlying issues, is not going to go well for Canada.”
Instead, Smith said Canada should strengthen its relationship with the U.S. by doubling oil exports to the United States and tightening border security. She said it should also fast-track pipeline projects to both coasts to reduce Canada’s reliance on the U.S. market. And she blamed Trudeau for botching Canada’s relationship with the United States. “If there’s a failure of leadership, and if there’s a damage to the relationship, it’s 100 per cent at the feet of Justin Trudeau,” she told journalists.
Smith also rejected any suggestion of restricting energy exports to the U.S. or imposing export tariffs on Canadian energy flowing south. Saskatchewan Premier Scott Moe supported Smith on that point, saying Ottawa should not impose export levies on any Canadian product. Moe also rejected the idea of a broad-based dollar-for-dollar response to any U.S. tariff. Instead, he said, Canada should consider “small, targeted tariffs.”
Moe did not raise those objections after a first ministers’ meeting the previous week. His change of tune suggests that unity among the first ministers is, if anything, becoming more fragile as the prospect of tariffs becomes more real.
Meanwhile, in an op-ed in The Globe and Mail, PPF Fellow and Canada’s former chief trade negotiator Steve Verheul argues that Canada will have no choice but to retaliate. Without a response “we’ll never know how much is enough,” he writes. “If we face 25-per-cent tariffs, we will need to aggressively bring balance and leverage to the negotiating table.” Verheul notes that Trump’s tariffs would leave Canada with far worse access to the U.S. than 166 other trading partners. “The U.S. would be providing huge preferences to countries such as China and Venezuela.”
The Alberta oil factor
As the war of words over tariffs heats up, the importance of Canada’s oil exports to the U.S. is getting more attention. The Wall Street Journal this week focused on the dangers to the U.S. economy of putting levies on Canadian oil in an article headlined: “How a Trump Trade War Puts Cheap Oil from Canada at Risk.”
The Journal says Energy Minister Jonathan Wilkinson would not rule out restricting energy exports if Trump imposes tariffs: “Nothing is off the table over the longer term.” It notes that Canadian producers ship about four million barrels of oil to the U.S. every day, accounting for 60 percent of the crude oil imported by the United States in 2024. American refineries are designed to process the heavy oil produced in the Alberta oil sands, making it best suited for the U.S. market.
Moreover, reported The Journal: “The imports also come at a bargain. Canadian oil typically trades at a 15-percent-or-more discount to American crude to account for transport costs, differences in quality and a limited pool of buyers. That translates to billions in additional annual profits for U.S. fuel makers, according to a 2021 report commissioned by the American Petroleum Institute.”
A Trump election?
The return of Donald Trump has already upended Canadian politics and it now appears it will lead to a snap Ontario election as well. Premier Doug Ford this week said he needs a fresh mandate to push back against Trump and spend billions of dollars in stimulus funding if the new administration slaps tariffs on Canadian imports.
“I need a clear mandate from the people of Ontario to fight against these tariffs, to make sure that we have a loud voice,” Ford told reporters. “This is going to be for four years with Donald Trump. He wants to undermine us any which way he can.”
The Toronto Star reported that Ford is considering calling an election on Jan. 29 for Feb. 27, or on Feb. 5 for March 6. Ford’s Progressive Conservatives have a solid majority at Queen’s Park and Ontario voters would normally not go to the polls until June 2026. Ford’s chief of staff, Patrick Sackville, told Conservative MPPs and ministerial chiefs of staff in a memo to be ready for an early election call.
Ford has been pushing a strategy he calls “Fortress Am-Can” to strengthen economic ties between Canada and the U.S. as an alternative to Trump’s tariffs. He published an opinion article in The Wall Street Journal on inauguration day arguing Canada can help the United States fight China’s threat to American jobs.
At the same time, he suggested Mexico might be cut out of any new U.S.-Canada deal. “Mexico also must step up,” he wrote. “That country has become a backdoor for cheap Chinese parts and products to enter the U.S. and Canada, undercutting American and Canadian workers and manufacturers. If Mexico doesn’t put a stop to Chinese transshipment, it should lose its seat at the table by being left out of trade agreements.”
Alberta Premier Danielle Smith said she’s worried that “certain political leaders are going to try to turn this relationship with Trump into some kind of election issue and damage the relationship.” Smith did not say who she had in mind.
Keeping a ‘cool head’
Mexico is also in Donald Trump’s cross-hairs, but Mexican President Claudia Sheinbaum is not yet talking about retaliating to any possible tariffs. “It’s always important to have a cool head,” she said this week.
Sheinbaum said Mexico will respond “step by step” to any U.S. trade measures. But she has already unveiled an economic plan aimed at restricting Chinese imports into Mexico in an apparent response to Trump’s complaint that China is using her country as a “back door” for cheap imports into the U.S.
The plan includes increasing local sourcing for industries reliant on Chinese imports, such as textiles and autos, as well as helping Mexican steel producers who have long accused China of undercutting the market.
Mexico has also taken strong steps to restrict the number of migrants crossing into the U.S. Despite Trump’s complaints about an “invasion” from Mexico, the number of people crossing the border is at its lowest level since 2020.
Mexico has broken up migrant caravans heading north to the U.S. border, and under pressure from the Biden administration it started busing thousands of migrants in the opposite direction, to destinations in the far south of the country. Sheinbaum has also cracked down on the illegal fentanyl trade, overseeing an operation that seized 20 million doses of the drug.
Ban bourbon, buy local
Two premiers warned this week that their provincial liquor outlets will clear U.S. alcohol from their shelves if Donald Trump goes ahead with tariffs on Canadian imports.
Doug Ford of Ontario said he has ordered the Liquor Control Board of Ontario to stop selling American products if tariffs are imposed. “Let’s start promoting more Ontario-made wines, and the vodkas, the spirits,” he said. “We are the largest purchaser of alcohol in the entire world. They will feel the pain.”
(Ford’s claim about the LCBO is often repeated in Ontario but has been widely questioned. Costco, Walmart and the British retailer Tesco are also enormous players in the global wine and spirits market.)
Premier David Eby of British Columbia said B.C. Liquor Stores could also stop selling U.S. alcohol. Normally, he said, the free trade agreement between Canada and the United States prevents the province from discriminating against American products. “But if they’re not going to abide by our trade agreements then neither are we,” he said.
Eby said people in B.C. should try to buy more Canadian products while the country is under threat. “When you’re at the grocery store and you have a chance to buy a product right now, you’re looking carefully at the labels to support Canadian jobs and to support Canada at this critical time,” he said.