How US-Canada relations will be affected by Trump’s return to power

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NEW YORK: Policy by social media was a hallmark of Donald Trump’s first term in the White House, but many were still shocked by his post three weeks after winning the presidential election in November.

To the surprise of Canadian officials, he announced on his social media platform Truth Social that he would impose a 25 per cent tariff on imports from Canada and Mexico to the United States.

The post set off alarm bells across the northern border, where the US is Canada’s biggest trading partner.

Canada exported nearly US$600 billion worth of goods to America last year, accounting for 77 per cent of its total exports. This included gas, cars, car parts, steel, lumber, grain and more. Up to 2 million jobs in the country also rely on its export industry.

With Trump taking office again on Monday (Jan 20), his arrival is being met with caution by one of the US’ closest allies.

The tariff debate has already had implications in Canada – it was one of the crises facing Canadian Prime Minister Justin Trudeau before his resignation on Jan 6.

CURRENCY ISSUES

Experts flagged concerns over how Canada’s currency and jobs will be affected if Trump’s proposed tariffs are implemented.

Ian Lee, an associate professor of management at Carleton University, noted that the currency markets will “respond instantly” the moment Trump puts pen to paper on the tariffs.

“The number one impact is that the currency markets are extraordinarily dynamic. They operate in real time. They respond instantaneously. There’s no lag. There’s no two-week lag or six-month lag like tariffs,” Lee said.

The business professor said the Canadian dollar will rapidly depreciate if so. He added that when the tariffs are then passed on to American importers and consumers, they will begin to seek alternatives.

“They will turn to Australia, they will turn to New Zealand, they’ll turn to China, they’ll turn to Europe – they’ll turn to countries that are not subject to the Trump tariffs,” he added.

Trump had issued these economic threats against Canada and Mexico due to his belief that they allowed illegal immigration to worsen – an issue he is set on eliminating and that he campaigned on.

US border agents made more than 23,000 arrests at the northern border between October 2023 and September 2024, according to US Customs and Border Protection.

However, the numbers are much higher at the southern border where agents arrested 250,000 people last December alone.

WHO WILL BE NEXT?

Trump’s plans to target nations with tariffs will leave other countries, including US partners, concerned and wondering who will be next, said former US ambassador to Tunisia Gordon Gray.

Gray, now a Kuwait Professor of Gulf and Arabian Peninsula Affairs at George Washington University, said the world will be watching for Washington to make a move.

“This kind of bombastic rhetoric, unfortunately, causes great concerns, raises great questions in the minds of traditional friends and partners. And they’re going to do the logical things to pursue their own self-interests,” he cautioned.

Nevertheless, Gray expressed hope that Trump will have more “sober” advisers to walk back these plans.

“When I say that, I don’t anticipate that no tariffs would be imposed at all, but I think that they might be a little bit more targeted than Trump’s rhetoric has suggested to this point,” he added.

Lee said he believes Canada has some negotiating power. About a third of its economy is protected from foreign competition by federal and provincial governments – something Lee said the US might be interested in changing.

He added: “I think if we’re willing to give up our sacred cows in Canada, which are these protected industries which exclude American companies, I think we can come to a deal with Mr Trump and have those pernicious tariffs removed.”

TRADE, TARIFFS NOT THE ONLY PROBLEMS

As Trump’s inauguration looms, Canada – and the world – has been waiting to find out how serious he is about an economic attack to secure his country’s border.

Still, trade and tariffs may not be the only problems Canada faces from its neighbour.

Trump has continued to taunt Canadians about becoming America’s 51st state, even having referred to Trudeau as its governor.

Tesla CEO and billionaire Elon Musk, who will co-lead a new Department of Government Efficiency in Trump’s upcoming administration, presents another challenge too.

Musk has recently been involving himself in the politics of foreign nations, including Canada where he has been supporting opposition and Conservative leader Pierre Poilievre – the man tipped to become Canada’s next prime minister.