Trump Threatens 100% Tariff on Canadian Goods Over China Trade Deal
U.S. President Donald Trump has threatened a 100% tariff on Canadian goods if Canada proceeds with a trade deal with China. This threat followed Canadian Prime Minister Mark Carney's recent agreement with China to reduce tariffs on specific goods and his remarks at the World Economic Forum in Davos.
Carney has denied pursuing a comprehensive free trade agreement with China, stating his Davos comments were intentional. However, U.S. Treasury Secretary Scott Bessent claimed Carney "aggressively walked back" his remarks during a phone call with Trump. These developments occur amidst broader U.S.-Canada tensions and precede a mandated review of the United States-Mexico-Canada Agreement (USMCA).
Tariff Threat and Canada's Response
On a Saturday, U.S. President Donald Trump threatened to impose a 100% tariff on all Canadian goods if Canada enters a trade agreement with China. The threat was communicated via Trump's social media platform, Truth Social.
Trump stated that if Canada made a deal with China, it would be "immediately hit with a 100% Tariff against all Canadian goods and products coming into the U.S.A."
He expressed concern that Canada might become a "Drop Off Port" for China to send goods into the United States. U.S. Treasury Secretary Scott Bessent echoed these concerns, stating:
The U.S. "can’t let Canada become an opening that the Chinese pour their cheap goods into the U.S."
Canadian Prime Minister Mark Carney responded on Sunday, clarifying that Canada has no intention of pursuing a free trade agreement with China. Carney stated that Canada respects its obligations under the United States-Mexico-Canada Agreement (USMCA), which requires prior notification before entering free trade agreements with nonmarket economies.
He described Canada's recent agreement with China as a "narrow trade arrangement" or "preliminary agreement" designed to address existing issues and consistent with CUSMA. Carney stated the agreement was to "rectify some issues that developed in the last couple of years." Dominic LeBlanc, Canada's Minister responsible for Canada-U.S. trade, confirmed that Canada is not pursuing a free-trade agreement with China but resolving "several important trade issues."
Details of Canada-China Trade Agreement
In 2024, Canada had mirrored U.S. policy by imposing a 100% tariff on electric vehicles (EVs) from Beijing and a 25% tariff on steel and aluminum. China responded with 100% import taxes on Canadian canola oil and meal, and 25% on pork and seafood.
During a visit to Beijing earlier this month, Prime Minister Carney announced Canada's reduction of its 100% tariff on Chinese electric cars. In exchange, China reduced tariffs on affected Canadian agricultural products. The agreement, reached on January 16, includes an initial annual cap of 49,000 Chinese EV exports to Canada at a 6.1% tariff rate, which is projected to increase to approximately 70,000 over five years.
Carney noted that prior to 2024, there was no cap on Chinese EV imports, and the initial cap represents about 3% of the 1.8 million vehicles sold annually in Canada. China also agreed to invest in the Canadian auto industry within three years as part of this arrangement. Specifically, China reduced duties on Canadian canola seed oil to 15% from March 1 (down from 85%) and exempted Canadian canola meal, lobsters, crabs, and peas from anti-discrimination tariffs until at least the end of 2026.
Diverging Views on Davos Remarks and Phone Call
At the World Economic Forum in Davos last week, Prime Minister Carney delivered a speech criticizing economic coercion by powerful nations against smaller countries, without explicitly naming the U.S.
Carney stated in Davos, "Middle powers must act together because if you are not at the table, you are on the menu."
On Tuesday, Carney affirmed that he reiterated his Davos remarks to President Trump during a 30-minute phone call on Monday.
"To be absolutely clear, and I said this to the president, I meant what I said in Davos," Carney stated.
Carney characterized the call, which Trump initiated, as a "very good conversation" covering Ukraine, Venezuela, Arctic security, and Canada's trade agreement with China. He indicated that he explained Canada's understanding of and response to changes in U.S. trade policy initiated by Trump, and that Trump understood Canada's position.
In contrast, U.S. Treasury Secretary Scott Bessent told Fox News that during the call with Trump:
Carney "was very aggressively walking back some of the unfortunate remarks he made at Davos."
Carney denied Bessent's account of the conversation. Bessent commented that Canada depends on the U.S., with "much more north-south trade than there could ever be east-west trade," and suggested Carney should cease "trying to push his own globalist agenda." Carney suggested that Trump's latest tariff threat could be a negotiation tactic in anticipation of upcoming USMCA talks, acknowledging Trump as a "strong negotiator."
Broader U.S.-Canada Tensions and Historical Context
Tensions between President Trump and Prime Minister Carney have increased in recent months. Trump had previously stated:
"Canada lives because of the United States."
Carney responded by asserting:
"Canada doesn't live because of the United States. Canada thrives because we are Canadians."
Following these exchanges, Trump withdrew an invitation for Carney to join his "Board of Peace," an organization for conflict resolution.
Trump has previously questioned Canada's sovereignty, suggesting it could become the "51st U.S. state" and referred to Carney as "Governor Carney." He has also shared altered social media images depicting Canada, Venezuela, Greenland, and Cuba as U.S. territory. Trump's reported interest in acquiring Greenland, which shares a maritime border with Canada in the Arctic, has been a source of concern for Canada and the NATO alliance.
Trump had imposed tariffs on some Canadian goods in the past, including a 35% tax on items not covered by a free trade agreement in August 2025 and a pledge to increase tariffs by 10% (not implemented) following an anti-tariff advertisement in Ontario.
Canada's Trade Diversification Strategy and USMCA Review
Prime Minister Carney informed President Trump of Canada's plan to diversify trade away from the United States with a dozen new deals across four continents within six months. Carney intends for Canada to double its non-U.S. exports within the next decade, reducing reliance on the U.S., which currently receives over 75% of Canada's exports. He plans to travel to India, Australia, and other countries as part of this strategy.
The United States-Mexico-Canada Agreement (USMCA) is scheduled for a mandatory review this year. Minister LeBlanc indicated that this will be a "robust review" as stipulated within the agreement, rather than a full renegotiation, and that Canada is prepared for prompt engagement.
Economic Interdependence
Canada is the primary export destination for 36 U.S. states. Approximately CAD $3.6 billion (US $2.7 billion to US $3.8 billion) worth of goods and services are exchanged across the border daily.
Canada supplies about 60% of U.S. crude oil imports and 85% of U.S. electricity imports. Canada is the largest foreign supplier of steel, aluminum, and uranium to the U.S. It also provides 34 critical minerals and metals that the Pentagon seeks. The Canadian auto industry relies on U.S. market access due to the smaller size of the Canadian market.