Will Donald Trump Really Start a Tariff War with Canada?

Key Points and Summary: Donald Trump’s proposed 25% tariffs on Canada have sparked economic and political tensions, with potential repercussions for both nations. Critics argue that the tariffs could harm U.S. and Canadian GDP while accelerating inflation.

-Economists warn that the plan, aimed at addressing border and drug issues, would disproportionately affect lower-income populations.

-Canada’s outgoing Prime Minister Justin Trudeau has vowed to retaliate, and officials are preparing a three-stage response targeting U.S. goods.

-While some view Trump’s threats as negotiation tactics, the tariffs could significantly impact trade relations between the two allies, especially in politically sensitive regions.

Donald Trump’s Tariff Threat: How Canada Plans to Respond

American presidents traditionally haven’t been especially belligerent towards Canada. They don’t typically joke about making Canada into America’s 51st state, or about wishing for hockey legend Wayne Gretzky to run to replace the country’s current prime minister. 

But Donald Trump, who returns to the White House later today, isn’t like most presidents. 

Trump, in addition to implying a wish for the United States to annex its neighbor to the north, has also threatened to place tariffs on Canada, along with Mexico and China. 

“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 said on Truth Social back in November. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” 

He later announced plans to create an “External Revenue Service” to supervise the collection of tariffs after he implied during last year’s campaign that tariffs could one day replace income taxation altogether. 

Economists vs. Tariffs 

NPR quoted economists as believing that Trump’s promises about tariffs will be hard for him to deliver on. 

“You can have a tariff for revenue or you can have a tariff for restriction, but you can’t have both,” Erica York, vice president of federal tax policy at the right-leaning Tax Foundation, told NPR. 

“I think a cynical reading of what the Trump administration is suggesting is a bunch of regressive tax cuts that help those at the top of the distribution, that are paid for with the regressive consumption tax that’s going to hit the poor the hardest,” Kimberly Clausing, a veteran of the Treasury Department, said in the same story. 

Bad For Both Countries? 

The Peterson Institute For International Economics released a study of the proposal, finding that if a 25 percent tariff really was placed on Mexico and Canada, “the imposition of the tariff would slow growth and accelerate inflation in all three countries.” 

“For the duration of the second Trump administration, US GDP would be around $200 billion lower than it would have been without the tariffs. Canada would lose $100 million off a much smaller economy, and at its peak, the tariff would knock 2 percent off Mexico’s growth rate,” the Peterson Institute study added. 

Then again, it’s often argued by Trump detractors that the threats are merely bluster, to extract concessions in negotiations. 

How Canada Will Respond to Donald Trump’s Tariff 

Canada’s outgoing Prime Minister, Justin Trudeau, said last week that “if push comes to shove,” Canada is ready to deal with the tariffs, including with some retaliatory measures that would come into place. 

“We will not hesitate to act,” Trudeau said Friday, per Politico. “We will respond, and I will say it again, everything is on the table.”

Per the New York Times, Canada is prepping “a three-stage plan of retaliatory tariffs and other trade restrictions against the United States,” one specifically focused at first on goods in Republican areas of the country. 

Donald Trump speaking to supporters at an immigration policy speech at the Phoenix Convention Center in Phoenix, Arizona. Image Credit by Gage Skidmore.

Canadian Foreign Minister Mélanie Joly, meanwhile, noted in the Politico story that while the possible Canadian tariffs aren’t exactly front-page news in the United States, the issue is “top of mind” North of the border. 

“A lot of senators have never heard about this Trump tariff tax,” Joly told the press last week. “A lot of them are understanding a bit more what would be their impact on their own constituency.”

Author Expertise and Experience: Stephen Silver 

Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.