Trump threatens trade war amidst talk of takeover
U.S. President Donald Trump has announced a blanket 25 per cent tariff on Canada after threatening “economic warfare” to make Canada the “51st state.”

After being paused for one month, U.S. President Donald Trump announced tariffs on Mexico and Canada will commence on March 4. China will also be charged an additional 10 per cent on March 4.

Trump had previously instituted the tariffs by executive order on February 1, citing Canada’s perceived inaction in stopping the flow of illicit drugs, especially fentanyl, from entering the U.S. as the rationale behind their imposition. Canada responded with its own retaliatory 25 per cent tariffs on American goods—a tariff package worth C$155 billion.

Trump’s tariffs on Canada were slated to be effective from February 4. However, last-minute negotiations allowed for a one-month delay. The proposed deal called for a joint task force along the Canadian and U.S. border to crack down on drug smuggling through the appointment of a Canadian “border czar.” 

On February 11, Canadian Prime Minister Justin Trudeau appointed Kevin Brosseau, a 20-year veteran of the Royal Canadian Mounted Police, to fulfill this role. Under him, the Canada Border Services Agency (CBSA) launched Operation Blizzard, which aimed to combat the trafficking of fentanyl across the border and produced a 97 per cent drop in fentanyl seizures coming from Canada, according to the U.S. Customs and Border Protection. 

There was previously uncertainty on whether the tariffs would be going ahead on March 4, as Trump and figures within his administration have floated pushing the tariff imposition date into April. However, on February 27, Trump posted on social media confirmation that the tariffs would indeed return on March 4, with possible additional tariffs on specific Canadian goods taking effect in April that are yet to be known.

The reasoning behind the tariffs and their economic effects

Trump can unilaterally impose tariffs and other duties on foreign goods, including Canada’s, due to the International Emergency Economic Powers Act (IEEPA). The act allows the President to have broad-ranging powers regarding trade provided the declaration of an emergency. 

The IEEPA would allow Trump to bypass Congress, which normally would have the final say on trade. Previous U.S. presidents had previously used the IEEPA to induce sanctions on countries such as Iran, Belarus, Cuba, and North Korea, among others.

Trump justified his tariffs on Canada by stating that the health crisis from rampant fentanyl usage created the conditions for a national emergency that required the invoking of the IEEPA. However, data from U.S. Customs and Border Protection indicated that, of the 21,889 pounds (9928.7 kilograms) of fentanyl seized, only 43 pounds (19.5 kilograms) originated in Canada.

The tariffs are projected to cause severe economic uncertainty within Canada and the U.S. According to the Bank of Canada’s Monetary Policy Report for January 2025, tariffs would increase the price consumers pay for the goods being tariffed, negatively affecting both sides in terms of gross domestic product (GDP) as net exports shrink for both countries. This price increase would cause firms to lay off workers and decrease production due to the loss in revenue. The loss in net exports means the GDP loss is permanent until the tariffs end.

Additionally, inflation is projected to increase due to a rise in the consumer price index, stemming from the strain in global supply chains from Trump’s trade policy and retaliatory tariffs’ impact on American imports, which would become more expensive. 

According to Bank of Canada Governor Tiff Macklem, Canada can alleviate some of these economic burdens by removing interprovincial trade barriers and reducing the regulatory load for Canadian workers to incentivize domestic demand.

Already, financial markets have become more volatile due to the uncertainty surrounding Trump’s tariffs. The projected effects tariffs have on GDP and inflation have spooked investors, who have lowered expectations for economic development in these countries. 

While stocks increased in volatility in response to the initial tariff threats, they stabilized once Trump delayed them until March. Nevertheless, volatility could pick up again should tariffs come into effect due to their negative economic effects on the two countries.

Economic warfare and attacks on Canadian sovereignty

A more pressing concern regarding the tariffs has been Trump’s willingness to use “economic force” to pressure Canada into accepting American annexation. In this regard, the tariffs would not be used to police fentanyl trafficking but rather to facilitate American economic aggression and to absorb Canada into the U.S. under the guise of “national security.” 

Trump had previously called Trudeau the “Governor of the Great State of Canada” on December 10, 2024. However, at the time, Canadian government officials indicated that Trump only said that as a joke and that the comments should not be taken seriously. 

However, on February 7, Trudeau indicated he no longer considers Trump’s comments a joke, considering its potential as a “real thing” meant to give the U.S. unfettered access to Canada’s mineral wealth. On February 9, Trump also said his statements about Canada being the 51st state was serious.

The threats to Canadian sovereignty have caused an upsurge in anti-American sentiment within Canada, as Canadians overwhelmingly resisted Trump’s belligerent actions. A grassroots movement intended to boycott American products has already taken off, intending to reduce the consumption of American goods unless the tariffs are withdrawn.

The provincial premiers, except for Alberta Premier Danielle Smith, released a joint statement on January 15 after Trump’s comments on using economic force to annex Canada. In the statement, the premiers affirmed Canada’s unity in the face of Trump’s threats, agreeing on a strategy to police fentanyl and illegal firearms across the Canadian and U.S. border while presenting a strong defence of Canadian sovereignty. They also presented tariffs as a strict negative for both countries.

Trump has openly floated the idea of Canada joining the U.S. to avoid the tariffs. In addition to the fentanyl mentioned in his executive order, Trump claimed that the U.S. had been under a trade deficit of US$200 billion, calling it a “subsidy.” However, trade deficits only mean Canada exports more to the United States than the other way around, and such trade can still boost the economies of both countries. 

The actual trade deficit is calculated to be US$45 billion, with the money being made from American consumer demand and the US dollar as a reserve currency, not through subsidies. 
According to U.S. government sources, the U.S. only subsidized Canada with US$253,850 in 2024, mainly through the International Non-proliferation Export Control Program, which aimed to ensure the non-proliferation of materials used to produce weapons of mass destruction through export controls and training of CBSA personnel to identify such materials.