Canada facing U.S. customs pressure: Is a Trade war looming?
Traditionally placid in the face of its powerful neighbor, the United States, Canada is preparing its response to the customs threats posed by Donald Trump. Although economically dependent on the U.S., Ottawa is demonstrating that it knows how to defend its interests when at stake.
Trade with the United States represents a massive share of Canada’s GDP: nearly 19% at the national level, and as much as 36% in key provinces like Alberta and Saskatchewan. A 25% increase in tariffs, as threatened by Trump, could lead to a recession in Canada, with growth reduced by 2 percentage points, a sharp decline in the Canadian dollar, and unemployment rising to 8%.
But Ottawa is not staying passive. During Trump’s previous term, Canada had shown its ability to retaliate by targeting symbolic American products, such as Kentucky bourbon or Harley-Davidson motorcycles. This approach forced Washington to lift tariffs on Canadian steel and aluminum.
The Canadian government is now stepping up its efforts. Provincial premiers are mobilizing their contacts with U.S. governors, emphasizing the interdependence of cross-border supply chains. The Canadian ambassador to the U.S. also reminds that Canada is the primary customer for 36 U.S. states, a significant economic lever.
At the same time, Ottawa is acting on multiple fronts. A $700 million investment is planned to enhance border security, and a gradual increase in the military budget is being considered to meet NATO’s expectations.
However, the challenges go beyond tariffs. Massive deregulation in the U.S. could threaten Canada’s attractiveness. Lower taxes and less bureaucracy south of the border could trigger a flight of capital and talent to the U.S., putting pressure on the Canadian social model.
Facing this reality, Canada must combine firmness with adaptability. While the standoff with Trump is a test of resilience, it also highlights the importance for Ottawa to strengthen its international partnerships to reduce its reliance on the U.S. market.
