President Donald Trump has adopted an aggressive approach towards trade, to the point where he threatened to impose a full tariff on all Canadian goods entering the US on January 24, 2026, following the conclusion of a trade deal with China. The message went directly to Canadian Prime Minister Mark Carney on Truth Social: “Whereas Governor Carney thinks that he can make Canada a ‘Drop Off Port’ where China can channel goods into the United States, he is severely wrong. Trump also warned that China would eat Canada whole, wiping out their businesses, social life and lifestyle, threatening to impose 100 percent tariffs at once on Canadian imports to punish them.
This heated language represents a hairpin turn from the words of Trump only a week ago when he hailed the overture of Carney to Beijing as positive and worthy of development. The trigger: Canada’s new strategic partnership was announced on Friday following the meeting between Carney and Chinese President Xi Jinping at Davos. The agreement will cut tariffs on Canadian canola, pork, and other agricultural exports in the Chinese market in return for having Ottawa permit as many as 49,000 Chinese-made electric vehicles (EVs) into its market at a 6.1 percent tariff, as opposed to the 100 percent tariff. The critics are worried that this would create a backdoor entry point to an overload of cheap Chinese EVs in North America to the detriment of the US-based manufacturers due to the Trump “America First” drive.
The reaction of Canada was quick but restrained. Trade Minister Dominic LeBlanc made it clear that it is not pursuing a free trade agreement with China, but the US is Canada’s remarkable partner within USMCA. LeBlanc said that its economy is being reinforced with diversified trade, whereby it has annual flows of up to $1 trillion of US-Canada flows -75 percent of Canada’s total trade. However, the office of Carney was adamant, referring to the China deal as a massive opportunity which could see bilateral expansion, and the agri-exports could increase by 20 percent to counter the dairy sorrows of the earlier USMCA tussles.
Fallout on the Economy Is Looming.
The 100 percent tariff would destroy Canada’s economy of which depends on its access to the US. Auto plants in Ontario, oil in Alberta and lumber in BC- $400 billion are on the brink of extinction. The economists at RBC predict the layoff of 500,000 jobs, a 5 percent GDP blowback, and a 55 US cent loonie. The inflation may rocket 3-4 percent as retaliation tariffs are a replica of the 2018 steel-aluminium war when Trump initially imposed 25 percent duties, and Canada had been responding with countermeasures on US whiskey, ketchup and steel worth 16 billion.
In the case of the US, there are numerous risks of blowback. The Canadian lumber prices are rising to increase housing expenses, which are already at 8 percent mortgage- and the imported energy (25 percent US crude) is costing more, fanning the Midwest refiners. EVs only escalate the confrontation. Trump imposes tariffs on Chinese batteries to save Ford and GM, yet the agreement with Canada will have BYD and NIO evade tariffs on imported vehicles through ports in Vancouver. Silver linings? It benefits the US farmers when the canola floods remain north, but generally, WTO challenges are looming.
Change of Direction in the Geopolitical Chessboard.
The salvo is typical of Trump: in 2018, when Trump renegotiated USMCA he these days won with such wins as dairy access, but hurt his relationship with Carney, whom he calls Governor in mockery a reference to Carney as Bank of Canada in his youth. The feud was fuelled by Carney Davos criticism of the schizophrenic US-led order, and being denied Trump entry to his “Golden Dome” missile shield. The split is celebrated in Beijing, with Canada branching out of the US dependence due to Huawei 5G bans.
Scholars regard rhetoric as becoming reality. Are tariffs leverageable by Trump–Canada blinks first, says veteran trade lawyer Simon Potter. However, the Congress is looking at restraint as midterms approach; polls show 70 percent of Americans are opposed to widespread tariffs. Carney could stop imports of EVs, however, farmers lobby to get canola relief as China is on a buying spree in 2025.
Investor Radar and Global Ripples.
Markets got cold: the TSX fell 2.3% Friday, the loonie fell 1.5%, and S&P futures fell 0.8%. Safe-haven bets surged with gold going to $2,650/oz. India is a keen observer- its canola imports from Canada (300 million annually) are subject to increases, however, US tariff battles would make Chinese dumping of steel shift towards Asia.
The clock runs as Trump doublespeak dares—Thanks, I appreciate your attention! Will Will Carney be back or light a trade war reprise? The financial lifeline of North America is on its deathbed, and alliances that have been made over decades are being severely put to the test.
