OTTAWA—When U.S. president-elect Donald Trump rattled global markets with a new threat of a 25 per cent tariff on Canadian and Mexican products and additional tariffs on China, it jolted the Canadian dollar and nerves at all government levels, led to predictions of a recession in 2025, and kicked off bitter partisan shots on Parliament Hill.
The early days of a new Trump era suddenly look a lot like the old days, only worse.
The Liberal government did not rule out retaliation — possibly a tariff war — if Trump goes ahead with his threat, just as Ottawa levied reciprocal dollar-for-dollar tariffs against the U.S. in 2018 during the bitter NAFTA renegotiation talks — a trade counter-punch that Chrystia Freeland said Tuesday worked.
Freeland, the deputy prime minister and finance minister, Public Safety Minister Dominic LeBlanc, and other cabinet ministers said Canada “shares” Trump’s concerns about border security and is intent on beefing it up where necessary, but insisted the overall Canada-U.S. relationship is “balanced and mutually beneficial.”
“The fact is, we need them and they also need us,” Freeland told reporters.
She pointed to Canadian exports of oil, hydroelectricity, critical minerals and metals the U.S. relies on, all of which could face a sudden 25 per cent price hike for American consumers and businesses.
Some economists suggested Canadian oil exports could eventually find new markets, but automotive, manufacturing, and other business leaders said Tuesday a 25 per cent surcharge would be devastating for most other Canadian export sectors.
University of Calgary Prof. Trevor Tombe updated a report he wrote for the Chamber of Commerce with a more dire prediction on “X” that 25 per cent across-the-board tariffs would hammer the Canadian economy, cause a recession, and lead to a loss of $2,000 in real annual income for people.
For months, the Trudeau government has told Canadians it was getting ready for the prospect of an incoming Trump administration. It knew he’d campaigned on a 10 per cent tariff on all on global imports. It was braced for surprises.
Yet on Monday night, Trump’s vow to exact a “big price” on Canada and Mexico and his lumping of Canada together with Mexico as a source of fentanyl and illegal immigration to the U.S. still landed like a bombshell, sources admitted.
Trump, in his statement on his Truth Social platform, claimed “thousands of people are pouring through Mexico and Canada, bringing crime and drugs at levels never seen before.” On his first day in office, he now says he would levy and keep a 25 per cent tariff in place “until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country!”
Trump’s aggressive move sent the Canadian dollar and Mexican peso into a fall in overnight markets.
Premier Doug Ford, who chairs the Council of the Federation, said it was “unfair” and “insulting” for Trump to compare Canada to Mexico. “It’s like a family member stabbing you right in the heart.”
Asked if Canada should respond in kind if Trump slaps a 25 per cent tariff on goods shipped into the U.S., Ford said: “Hopefully we won’t come to that. But if it does, there is no choice. We have to retaliate.”
Prime Minister Justin Trudeau immediately called Trump’s team Monday night, but the call resulted in no pullback by Trump, or dialing down of the threat.
Trudeau told the Commons they talked about “how important it was for us to work together to solve some of the challenges we are facing as a continent and as countries, but also work to grow our economy and protect our workers on both sides of the border.”
The prime minister essentially argued Canada is not the same problem Mexico is — rather it’s a solution to American concerns about border integrity.
A senior government official told the Star the call lasted about 10 minutes, with the first few minutes spent on niceties and catching up, and was not confrontational.
Still, at the end of it, Trudeau and his inner circle recognized Trump’s threat must be taken seriously, that Trump has set a deadline at his swearing-in date, and so the government must spend the next two months to avoid that.
The sense of urgency pervaded Parliament Hill Tuesday.
The Commons was to hold an emergency debate Tuesday night, and Trudeau said he has convened a first ministers’ meeting Wednesday night, at 5 p.m. to hash out how to handle the incoming Trump administration, and the potential crisis posed by his latest threat.
It remains unclear if Trump is staking out a tough initial negotiating position, or trying to scare foreign investment capital away from Canada and Mexico. The renegotiated North American trade pact is up for review in 2026 and Trump has boasted since his re-election that he fixed it in his first term.
Known here as the Canada-U.S.-Mexican-Agreement or CUSMA, that deal protects duty-free trade among the three countries, and mostly prevents the use of tariffs on each other.
Mexican President Claudia Sheinbaum said a tariff war would put “our common businesses at risk,” Associated Press reported.
“It is unacceptable and would cause inflation and job losses in Mexico and the United States,” Sheinbaum said.
Inside and outside the Commons, the prime minister issued a call for Canadian political leaders to set partisanship aside and show a united front in a “Team Canada approach” to Trump.
However, Trudeau’s call didn’t bridge the deep partisan divide on Parliament Hill.
Outside the Commons, Conservative Leader Pierre Poilievre said Trudeau and Freeland were surprised by Trump’s threat because they are “weak,” and that “if necessary” he would be willing to retaliate against any Trump tariffs, although he did not specify in what manner .
Inside the chamber, Poilievre erroneously said Trump made the threat after Trudeau had called him, lambasting Trudeau for having no real plan other than a “Zoom call.”
“Where is the plan to stop the drugs and keep our border open to trade?” Poilievre demanded.
Trudeau retorted Poilievre “is just making stuff up” — Trump’s threat preceded and prompted their call — and resorting to slogans and fear-mongering. “We are going to continue to work constructively with the incoming administration to protect Canadian jobs, to protect Canadian growth and to take the responsible approach that is not steeped in partisanship,” the prime minister said.
New Democrat Leader Jagmeet Singh said, “The only thing a bully responds to is strength. Where is our plan to fight back? Where is the war room? Where is a concrete plan to bring our issue before CUSMA? Why is the prime minister not fighting like hell for Canadian jobs?”
Trudeau said the “idea of going to war with the United States” is not what anybody wants, and his government would not react by “freaking out the way the leader of the NDP seems to be.”
Two premiers — Alberta’s Danielle Smith and Quebec’s François Legault — backed Trump, with Smith posting that he “has valid concerns related to illegal activities at our shared border.”
“I think that the concerns expressed by Donald Trump are legitimate,” said Legault, speaking in Quebec City. “I understand that the problem is far worse on the Mexican border, but the fact remains that when you look at what’s happening on the Canadian border, especially in recent years, there’s been a significant increase in the number of illegal immigrants going through Canada to arrive in the United States. So Mr. Trudeau, more than ever, now must present a plan, a plan to properly protect the border on both sides.”
NDP Premier Wab Kinew of Manitoba said Canada could more quickly invest in defence and border security to allay Trump’s concerns.
ult agreed a 25-percent tariff would hit many sectors hard, and lead to “tens of thousands” of job losses. Asked if Canada should retaliate in kind with tariffs, Legault appeared skeptical. Quebec sends $87 billion in exports to the U.S. “We export twice as much as what we receive from the US. So the last thing we want is a trade war. We can’t rule it out, but I think we need to do everything we possibly can to avoid it.”
With a file from Robert Benzie
