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Trump 2.0 is set to upend US-Canada relations
Donald Trump is returning to the White House. Winning the presidency, along with control of the Senate and possibly the House of Representatives, means Republicans have a long runway for policy reform — which is making Canada nervous as the Trudeau government stares down possible challenges from the next administration on trade, defense, immigration, and more.
Trump’s tariff threat looms large
Sitting atop Canada’s pile of worries is Trump’s threat to impose a minimum 10% tariff — and possibly as high as 20% — across the board on US imports, which would drive consumer prices higher in the US and could cost Canadian trade partners billions. Canada will try to finagle an exemption, but there is no guarantee it’ll succeed.
If slapped with tariffs, Canada may be forced to retaliate with its own protectionist measures, ensuring a trade war. Roughly CA$3.6 billion in goods move across the border daily, and nearly 80% of Canada’s exports go stateside.
But tariffs aren’t the only trade concern. Trump, who views trade agreements through the lens of zero-sum power politics, says he will (once again) negotiate the US-Mexico-Canada free trade agreement, which comes up for review in 2026. During his first term, the Republican leader replaced the North American Free Trade Agreement with USMCA, which caused considerable headaches for the Trudeau government. Canada made concessions during the renegotiation, including increased market access for the US to Canadian dairy and stricter rules of origin for automobiles — criteria to determine if enough North American production has gone into a vehicle to grant it preferential tariff treatment. During the process, Trump called Justin Trudeau “two-faced” and a “far-left lunatic.”
Pressure to spend, border woes, freshwater demands — oh my!
Canada will also face growing pressure from the Trump administration to increase its defense spending and NATO commitments.
Days ago, former US Ambassador to Canada Kelly Craft gave a sense of just how urgent the spending boost might have to be. This summer, Canada released a plan to grow its share of defense spending to the NATO target of 2% of GDP by 2032. Craft says that’s not fast enough. But to hit that target, Canada would have to doubleits defense spending in the next seven to eight years, which might be tricky if the country is hurting from a trade war with its biggest trading partner.
During the election, Trump also said he would begin a program of mass deportations. The costly idea is a stretch, but as the CBC’s Evan Dyer argued in July, even the notion of such a program could cause problems for Canada, with concerned migrants in the US moving north ahead of a possible deportation blitz.
During the first Trump administration, and into the Biden administration, a growing number of irregular crossings were a challenge, leading to a renegotiated border deal in 2023, which tightened border security.
Trump has also talked about going after Canadian freshwater to solve US water shortages. Canada is one of the world’s largest sources of freshwater — with roughly 20% of the global total. Trump has floated the idea of diverting Canadian water to the US, particularly to drought-prone California.
The president-elect recently touted the idea on Joe Rogan’s podcast, and in September, he said British Columbia has “essentially a very large faucet” that could be turned on “one day” to divert water flows south to California. But there isn’t that much spare water to divert, and the flows are already governed by the Columbia River Treaty — another deal that might be up for (further) review.
All public smiles and reassurances, for now
The first Trump administration was rough for Canada, and the Trump-Trudeau relationship was … not warm. In January, Trudeau warned that a second Trump presidency would be “a step back” for Canada. “It wasn’t easy the first time, and if there is a second time, it won’t be easy either,” the prime minister said.
Indeed it won’t. Some in Canada may be hoping the pain won’t arrive until the 2026 free trade renegotiations, but that’s probably wishful thinking.
“The headaches may come much sooner than the USMCA negotiations," says Gerry Butts, vice chairman and senior adviser at Eurasia Group. “Trump’s immigration and tariff policies will put pressure on an already strained Canadian consensus about immigration and cause swift damage to the economy.”
Nonetheless, Trudeau was quick to congratulate Trump on his second win, emphasizing that the relationship between the US and Canada is “the envy of the world,” and saying, perhaps more in hope than in anticipation, that he knows he and Trump “will work together to create more opportunity, prosperity, and security for both of our nations.”
Canadian Foreign Minister Mélanie Joly noted that Canada has been preparing for either a Democrat or Republican “for months” through networks in the US and globally. She was joined by several Cabinet ministers who at least feigned hope that things would work out given the deep ties between the two countries.
Graeme Thompson, a senior analyst with Eurasia Group’s global macro-geopolitics practice, isn’t convinced the rosy picture the Canadian government is painting reflects reality. “Trump doesn’t care about historic ties; he couldn’t care less.”
Thompson says the relationship between the US and Canada is now as fraught as it has been in a century. But, he notes, Canada is still better off vis-à-vis the US than every other country in the world, which is something at least.
How to manage a forever crisis
The challenge for Canada now is navigating the second Trump administration, particularly as the Trudeau government, down in the polls, faces its own election a year from now — if not sooner.
Canadians prefer the Conservative Party leader over Trudeau when it comes to handling Trump, but for now, the job is Trudeau’s. The plan this time seems to be similar to last time: Rather than going all-in on the White House itself, Canada will work with the Trump administration by lobbying statehouses and governors, especially along the border states, along with Capitol Hill and industry. The government has also reestablished its Cabinet committee on US-Canada relations, chaired by Finance Minister Chrystia Freeland.
Thompson says Canada has an advantage in managing the Trump administration because of the country’s deep familiarity with the US and close connections nationally and at the state level. But history and expertise aside, there’s no guarantee there won’t be challenges and pain for Canada — especially on trade and defense — despite the rhetoric.
“It’s really hard to see how this is not more challenging than at any other time,” Thompson says. “I think that for the next four years, we can expect that any grievance or opportunity to take a hard line to gain something that presents itself, that’s the line the Trump administration will take.”
Former US President Donald Trump talks with Canada's Prime Minister Justin Trudeau.
Canada braces for a Trump presidency
Canada’s Foreign Minister Mélanie Joly says Justin Trudeau’s government is working on a “game plan” for how it would respond to a right-wing, protectionist government in the United States after the 2024 election – just in case. She said she would work with local and provincial leaders as well as the business community and unions to do so.
Joly also referenced the efforts Canada made the last time, when Trudeau launched a charm offensive in 2016 in a bid to keep Trump sweet. Canadian political and business leaders made an unprecedented push to communicate with different levels of the US government and the business community about the value of the trade relationship. They eventually negotiated a new deal similar to NAFTA, the United States-Mexico-Canada Agreement.
The possibility of a second round with Trump, who forced Canada to renegotiate its crucial trade relationship with the US, is widely seen as a threat to the countries’ trading partnership.
And Trump is not doing anything to calm the waters. The former president met recently with advisers at his Mar-A-Lago compound in Florida to discuss his plans for the 2024 election, according to the Washington Post. They discussed the idea of a “universal baseline tariff” on imports to the US, with Trump interested in putting a “ring around the U.S. economy.” This, Trump told Fox News, could entail a 10% tariff on all imports.
Under the terms of USMCA, most trade between Canada, the US, and Mexico is currently conducted without tariffs. But that deal is due to be reviewed and renewed in 2025-2026.
More than $3 billion in goods and services cross the border each day, everything from auto parts to building supplies to Amazon packages. In 2016, the two countries did $627.8 billion worth of trade. By 2022, it had increased to $1.2 trillion – so any disruption could have cataclysmic effects on the trade-dependent Canadian economy, as well as serious effects on the US economy, particularly in border states.