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Canadian Prime Minister Mark Carney will visit US President Donald Trump at the White House on Tuesday in what could be one of the most contentious meetings between the neighboring countries’ leaders in years.
Canada is America’s second-biggest trading partner and one of its closest allies on many fronts, from national security to commerce. But Trump’s aggressive tariff blitz in recent months has undermined that longstanding relationship — and inadvertently helped Carney consolidate political power.
In a stunning rebuke to Trump, Canada’s Liberal Party, with Carney as its leader, won federal elections last week, putting the newly elected government on a collision course with the Trump administration. In a defiant post-election speech, Carney said “we are over the shock of the American betrayal but we should never forget the lessons.”
Canada and the United States have shared free trade for decades, but Trump’s sweeping tariffs upended that symbiotic relationship — and the damage Trump’s trade war has inflicted on America is severe, as well.
Commerce Secretary Howard Lutnick on Monday told Fox Business that a deal with Canada is possible but would be “very complex.”
Escalating trade tensions
Until February, the two countries were bound by the United States-Mexico-Canada free trade agreement, a deal brokered by Trump himself in his first term. The USMCA, ratified in 2020, replaced the quarter-century-old North American Free Trade Agreement.
But Trump changed that this year.
In early March, a blanket 25% tariff on Mexico and Canada went into effect briefly before it was suspended after leaders from both countries promised to take more action to stem the flow of fentanyl and illegal immigration into America. But a 25% tariff is still in place for imported goods from Mexico and Canada that are not compliant with the USMCA.
Trump has also announced 25% tariffs on all cars, steel and aluminum in recent months, as well as a tariff on auto parts.
Canada responded to Trump’s actions with a 25% tariff on C$30 billion (or about $22 billion) worth of US imports, plus an additional 25% duty on C$29.8 billion (about $22 billion) in response to Trump’s metal tariffs. Canada has also slapped tariffs on cars imported from the United States.
That trade war has huge repercussions for both economies.
Canada accounts for 14% of all trade, according to government data. Canada is also the top country the US exports goods to — $349.4 billion in 2024 — with the biggest exports being energy and cars.
Meanwhile, the United States is Canada’s top destination for its exports — more than three-fourths of them — which include softwood lumber, steel and aluminum. About 30% of the softwood lumber consumed in the United States is imported, with Canada accounting for more than 80% of those imports.
Trump’s trade war is already weighing on American businesses of all sizes. General Motors CEO Mary Barra said in an interview with CNN last week that tariffs will cost her company between $4 billion and $5 billion this year.
At the other end of the spectrum, Beth Fynbo Benike, owner of baby products company Busy Baby, told CNN that a container of goods to replenish her inventory will now cost her nearly $230,000 to arrive on US soil.
The Federal Reserve’s latest Beige Book report, a periodic compilation of survey responses from businesses across the country, offered various accounts of American businesses noticing fewer Canadian tourists — which is taking a hit to their bottom line.
“Some retailers and hospitality providers in Northern Washington and Southern California reported a material drop in cross-border tourism with Canada and Mexico,” the report said.
Canadians are also opting to not purchase American-made products, forgoing Californian tomatoes for Italian tomatoes, Ohio-made pepperoni for meats produced in Ontario and Quebec and Coca Cola for sparkling water, sweetened with Canadian maple syrup.
“We, as Canadians, we don’t go out and try to create fights,” Dylan Lobo, a Toronto resident who runs the online directory Made in Canada, told CNN in March. “It’s an attack on Canada.” (CNN)
