Donald Trump has issued his worst threat to Canada in years, warning that on his first day in office he could impose economic sanctions on North America.
The US president-elect threatened on Monday evening to impose a 25 percent tariff on all products entering the country from Canada and Mexico on Jan. 20, 2025, his inauguration day.
He launched the warning on his social media platform Truth Social, in a song that began with a complaint about immigration and the spilling of drugs from the north and south border into the US.
He then foreshadowed crippling import tariffs that would raise costs for Canadian and Mexican exporters, make their products look less attractive while potentially raising costs for American consumers.
“On January 20th, as one of my first Executive Orders, I will sign all necessary documents to impose a 25% Tariff on Mexico and Canada on ALL products entering the United States, and ridiculous Open Borders,” Trump said.
“This tax will remain in effect until such time as drugs, especially Fentanyl, and all illegal aliens stop this invasion of our country!
“Both Mexico and Canada have the absolute right and power to easily resolve this long-simmering problem. So we want them to exercise this power, and until they do, it’s time for them to pay a very heavy price!”
The Canadian dollar is rising
The news sent the Canadian dollar plunging in overnight trading, to a low level not seen in years. This happened, when Canadian cabinet ministers met to discuss American relations, said a source in the organization.
Prime Minister Justin Trudeau also established a cabinet committee on Canada-US relations this month, anticipating a repeat of border uncertainty during Trump’s last presidency.
It is unclear whether Trump intends to proceed with the idea as outlined. Another feature of his first term was occasionally issuing threats of tariffs as part of negotiations.
Monday’s news brought back memories of 2017 and 2018.
Trump was on the verge of officially announcing his intention to cancel the North American Free Trade Agreement in 2017, just before negotiations on a revised agreement began.
As those negotiations stalled over the next year, he threatened to impose tariffs on Canadian auto sales, only to withdraw those fears a few days later, when Canada and the US agreed on a revised trade deal.
But Trump sometimes follows through with threats. He actually imposed tariffs on Canada in his first term, on steel and aluminum, before the countries could negotiate freely.
Negotiation trick or not?
What’s not clear is how this tax threat fits in with one of Trump’s biggest campaign promises: lowering the cost of living in general for Americans, and the cost of gas in particular.
Oil is Canada’s number 1 export to the United States. A 25 percent oil tax will challenge that infrastructure election promise.
The former Canadian Cabinet minister responded to the news by recalling what it was like dealing with Trump during his first term.
“And so it begins,” Catherine McKenna, the former environment minister, wrote on the BlueSky social media site. “The time and energy our government had to spend on Trump last time was in vain.
Ontario Premier Doug Ford said on social media X that the 25 percent tax “will seriously hurt workers and jobs in Canada and the US.
A 25 percent tariff would hurt workers and jobs in Canada and the US
The federal government needs to take this situation at our border seriously. We need Team Canada’s approach and response—and we need it now. Prime Minister Trudeau must immediately call…
“The federal government needs to take this situation at our border seriously,” he said, calling for a “team Canada” approach, involving the prime ministers.
Ford had already requested that Trudeau meet with the prime minister, saying in the letter that he and his fellow prime ministers wanted to meet to discuss how Ottawa plans to deal with its relationship with Washington.
But Flavio Volpe, president of the Automotive Parts Manufacturing Association, urged patience, saying the interests of the Canadian auto industry are aligned with American interests.
“We have clarified whether it is possible for him to combine the issues of Canada and Mexico, we have been there,” said Volpe.
“We are prepared and connected. I dare say, many Canadians and many members of the current government agree with former Trump colleagues.”
Economists have been struggling for months to assess the potential impact of Trump’s tariffs on Canada.
Various estimates have pegged the potential damage to Canada at anywhere from less than half a point of GDP to a devastating five percent.
That’s because the details of his plan were vague: he talked about a 10 percent world price, but sometimes changed the numbers around. It is also not clear what he can release, such as energy products.
But this is the first time in years that he has threatened Canada, in particular, and certainly the first time that he has threatened such a large tariff on every product.
