Donald Trump has levelled his most severe threat against Canada in years, warning that on his first day on office he might impose punishing economic sanctions across North America.
The U.S. president-elect threatened Monday evening to slap a 25 per cent tariff on all products entering the country from Canada and Mexico on Jan. 20, 2025, his inauguration day.
He delivered the warning via his social media platform Truth Social, in a post that began with a complaint about migration and drugs spilling across both the northern and southern border into the U.S.
Then he foreshadowed a damaging import fee that would drive up costs for Canadian and Mexican exporters, making their products less attractive while also potentially raising costs for American consumers.
“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump posted.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!
“Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”
Canadian dollar plunges
The news sent the Canadian dollar plunging in overnight trading, to a low unseen in years. This was, coincidentally, as Canadian cabinet ministers were meeting to discuss U.S. relations, said a federal source.
Prime Minister Justin Trudeau re-established a cabinet committee on Canada-U.S. relations this month, in anticipation of a repeat of the cross-border uncertainties during the last time Trump was president.
It’s unclear whether Trump intends to proceed with the idea as described. One feature of his first term was occasionally issuing tariff threats as part of a negotiation.
Monday’s news rekindled memories from 2017 and 2018.
Trump was on the verge of officially declaring his intention to cancel the original North American Free Trade Agreement in 2017, just before negotiations began on the updated deal.
As those talks hit snags the following year, he threatened to impose punishing tariffs on Canadian automobile exports, then lifted that threat a few days later, when Canada and the U.S. agreed to an updated trade pact.
But Trump sometimes follows through with threats. He did actually impose tariffs on Canada in his first term, on steel and aluminum, before the countries could negotiate an exemption.
Negotiation tactic or not?
What’s unclear is how this tariff threat squares with one of Trump’s major promises of the campaign: to lower the cost of living in general for Americans, and the cost of gas in particular.
Oil is Canada’s No. 1 export to the United States. A 25 per cent levy on oil would present a challenge to that seminal election promise.
A former Canadian cabinet minister reacted to the news by recalling what it was like dealing with Trump in his first term.
“And so it starts,” Catherine McKenna, the former environment minister, posted on the BlueSky social media site. “The amount of time and energy our government had to spent on Trump last time was bonkers.”
Ontario Premier Doug Ford said on social media platform X that a 25 per cent tariff would be “devastating to workers and jobs in both Canada and the U.S.
A 25 per cent tariff would be devastating to workers and jobs in both Canada and the U.S.<br><br>The federal government needs to take the situation at our border seriously. We need a Team Canada approach and response—and we need it now. Prime Minister Trudeau must call an urgent…
—@fordnation
“The federal government needs to take the situation at our border seriously,” he said, calling for a “Team Canada” approach, involving the premiers.
Ford had already been asking for Trudeau to meet with the premiers, saying in a letter that he and his fellow premiers want to meet to discuss how Ottawa plans to approach its relationship with Washington.
But Flavio Volpe, president of the Automotive Parts Manufacturing Association, urged patience, saying the auto industry’s interests in Canada overlap with U.S. interests.
“We’ve gamed out the possibilities that he lumps Canada and Mexico issues together, we’ve been there before,” Volpe said.
“We are prepared and connected. Dare I say, many Canadians and many members of the current government are on friendly terms with their former Trump counterparts.”
Economic forecasters have been struggling for months to assess the potential impact of Trump’s tariffs on Canada.
Various projections have pegged the potential damage to Canada at anywhere from less than a half-point of GDP to a devastating five per cent.
That’s because the specifics of his plan have been unclear: he’s talked about a 10 per cent global tariff, but has sometimes changed the numbers around. It’s also unclear what he might exempt, such as energy products.
But this is the first time in years he’s threatened Canada, specifically, and certainly the first time he’s threatened a tariff this large on every product.