Canada examines possible retaliatory tariffs on US items after Trump's threat

Trump has threatened to impose tariffs on products from Canada and Mexico if the countries don't stop what he called the flow of drugs and migrants across southern and northern borders. He said he would impose a 25 per cent tax on all products entering the US from Canada and Mexico as one of his first executive orders.

In Short

• Canadian officials say lumping Canada with Mexico is unfair
• PM Justin Trudeau holds emergency meeting, aims to negotiate trade deal excluding Mexico
• Trump threatens tariffs on Canada, Mexico if migration, drug flow don't stop

Canada is already examining possible retaliatory tariffs on certain items from the US should President-elect Donald Trump follow through on his threat to impose sweeping tariffs on Canadian products, a senior official said Wednesday.

Trump has threatened to impose tariffs on products from Canada and Mexico if the countries don’t stop what he called the flow of drugs and migrants across southern and northern borders. He said he would impose a 25 per cent tax on all products entering the US from Canada and Mexico as one of his first executive orders.

But Trump posted on Wednesday evening on Truth Social that he had a “wonderful conversation” with new Mexican President Claudia Sheinbaum.

“Mexico will stop people from going to our Southern Border, effective immediately. THIS WILL GO A LONG WAY TOWARD STOPPING THE ILLEGAL INVASION OF THE USA. Thank you!!!” Trump posted.

It wasn’t immediately clear if that frees Mexico from the tariff threat.

“She has agreed to stop migration through Mexico, and into the United States, effectively closing our Southern Border. We also talked about what can be done to stop the massive drug inflow into the United States, and also, US consumption of these drugs,” Trump added.

In Canada, a government official said Canada is preparing for every eventuality and has started thinking about what items to target with tariffs in retaliation. The official stressed no decision had been made. The person spoke on condition of anonymity as they were not authorised to speak publicly.

When Trump imposed higher tariffs during his first term in office, other countries responded with retaliatory tariffs of their own. Canada, for instance, announced billions of new duties in 2018 against the US in a tit-for-tat response to new taxes on Canadian steel and aluminium.

Many of the US products were chosen for their political rather than economic impact. For example, Canada imports $3 million worth of yogurt from the US annually and most comes from one plant in Wisconsin, home state of then-House Speaker Paul Ryan. That product was hit with a 10 per cent duty.

Another product on the list was whiskey, which comes from Tennessee and Kentucky, the latter of which is the home state of then-Republican Senate leader Mitch McConnell.

Trump made the threat Monday while railing against an influx of illegal migrants, even though the numbers at Canadian border pale in comparison to the southern border.

The US Border Patrol made 56,530 arrests at the Mexican border in October alone -- and 23,721 arrests at the Canadian one between October 2023 and September 2024.

Canadian officials say lumping Canada in with Mexico is unfair but say they are happy to provide more resources and work with the Trump administration to lower the numbers from Canada.

The Canadians are also worried about a influx north of migrants if Trump follows through with his plan for mass deportations.

Trump also railed about fentanyl from Mexico and Canada, even though seizures from the Canadian border pale in comparison to the Mexican border.

US customs agents seized 43 pounds of fentanyl at the Canadian border last fiscal year, compared with 21,100 pounds at the Mexican border.

Canadian officials argue their country is not the problem and that tariffs will have severe implications for both countries.

Canada is the top export destination for 36 US states. Nearly 3.6 billion Canadian dollars ($2.7 billion) worth of goods and services cross the border each day.

About 60 per cent of US crude oil imports are from Canada, and 85 per cent of US electricity imports are from Canada. Canada is also the largest foreign supplier of steel, aluminium and uranium to the US and has 34 critical minerals and metals that the Pentagon is eager for and investing in for national security.

Prime Minister Justin Trudeau held a emergency virtual meeting on Wednesday with the leaders of Canada’s provinces. He stressed they need to present a united front.

“Our country is facing a significant challenge,” Deputy Prime Minister Chrystia Freeland said. “Now is really a moment for us not to squabble amongst ourselves.”

The provincial premiers want Trudeau to negotiate a bilateral trade deal with the US that excludes Mexico.

Sheinbaum, Mexico’s president, said earlier Wednesday that her administration is already working up a list of possible retaliatory tariffs “if the situation comes to that”.

She later said she talked to Trump and had “an excellent conversation.”

“We discussed Mexico’s strategy on migration issues, and I told him the caravans are not reaching the northern (US) border, because Mexico is taking care of them,” Sheinbaum wrote in her social media accounts.

“We also talked about reinforcing cooperation on security issues, within the framework of our sovereignty, and the campaign we are carrying out to prevent fentanyl consumption,” she wrote.