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- President Trump has threatened Canada with a 100% tariff over the weekend if they reach a trade deal with China, signaling a major turning point for the two allies.
- Canada announced earlier this month a preliminary deal with China that includes Canadian exports of agriculture and electric vehicle imports from China.
- After the World Economic Forum, Trump withdrew Canada from the board of peace and dismissed the trade deal between the US, Canada and Mexico.
Tensions between the United States and Canada have escalated sharply following President Donald Trump’s latest tariff warning.
On Saturday, Trump announced that Canada would face a 100% tariff on all goods entering the US if the country finalizes a trade agreement with China.
This threat marks a dramatic shift in the relationship between the two nations and raises concerns about the future of North American trade.
The Ultimatum
Trump’s message on Truth Social was blunt: strike a deal with China, and Canadian products face an immediate doubling of their costs at the US border. The US president framed his concern around what he sees as potential backdoor tactics, suggesting China might use Canada as a workaround to avoid US tariffs.
In August 2025, Trump already raised tariffs on Canadian goods to 35%. While most Canadian exports still flow freely under the Canada-US-Mexico Agreement, key sectors like steel, copper, and certain automotive parts already face duties. A jump to 100% would be economically damaging. ⁽¹⁾
What Canada Actually Agreed To
Earlier this month, Canada’s Prime Minister Carney announced a preliminary deal with China that focused on practical trade wins. Beijing lowered tariffs on some Canadian agricultural products, while Canada expanded quotas for Chinese electric vehicle imports at a 6.1% tariff rate. ⁽²⁾
Canada’s position? This is about serving their own consumers and businesses, not circumventing anyone else’s trade policies. Officials emphasized that structured relationships with China don’t replace the deeply rooted US-Canada partnership that has benefited workers and competitiveness on both sides of the border.
Interestingly, just a week before his threat, Trump had praised this very approach. On January 16, he told reporters that Carney was doing exactly what he should be doing, calling the potential China deal “a good thing.” ⁽³⁾
The Davos Turning Point
At the World Economic Forum in Davos, Carney delivered a speech that didn’t name Trump or the United States directly. He declared the rules-based global order over and called on middle powers to band together against coercion from the world’s superpowers. His most memorable line: “If you are not at the table, you are on the menu.” ⁽⁴⁾
In his own speech, Trump countered that “Canada lives because of the United States.” Carney fired back during an appearance in Quebec, rejecting the characterization entirely.
“Canada doesn’t live because of the United States,” he said. “Canada thrives because we are Canadian.” He went on to emphasize the remarkable partnership the two nations have built in economics, security, and cultural exchange. ⁽⁵⁾
A Relationship Unraveling
The fallout was swift. Trump withdrew Canada’s invitation to his Board of Peace, a new initiative meant to address international conflicts. Countries seeking permanent seats on the board face a $1 billion entry fee, and while Carney had expressed interest, those plans are now shelved. ⁽⁶⁾
The tension is a stark departure from just months ago. After Carney’s election last year, Trump spoke warmly about their relationship, predicting it would be “very strong.” Now, Trump has dismissed the mega trade deal between the US, Canada, and Mexico set for renegotiation in July as “irrelevant.” ⁽⁷⁾
The Pattern and What’s Next
Trump has issued numerous tariff threats since returning to the presidency, though he sometimes paused or abandoned them during negotiations. Just this week, he walked back threats against European allies after NATO leaders promised increased Arctic security commitments.
Whether the Canada threat follows a similar path remains to be seen. What’s clear is that the relationship between two of the world’s most integrated economies has shifted from congenial to confrontational in a matter of days, and businesses and workers on both sides are watching nervously to see what comes next.
