The meeting was meant to be tense, but the mood in Ottawa’s Langevin Block was somber as trade officials gathered for an emergency session. Canada faces what many are calling an existential economic threat: President Donald Trump’s proposed 10-20% blanket tariffs on imports from all trading partners, including Canada, the largest U.S. trading partner.
“We’ve seen this movie before,” said Laura Dawson, former director of the Wilson Center’s Canada Institute, referencing the 2018 steel and aluminum tariffs that left lasting scars on Canada-U.S. trade relations. “But this sequel has higher stakes for both countries.”
The potential economic impact is staggering. Canada sends approximately 75% of its exports to the United States—representing roughly $500 billion in goods and services annually, according to Statistics Canada. Any significant disruption threatens hundreds of thousands of jobs across manufacturing, agriculture, energy, and services sectors.
“This isn’t just about aluminum or lumber anymore,” explained Perrin Beatty, president of the Canadian Chamber of Commerce. “We’re talking about disrupting deeply integrated supply chains that have developed over decades. Auto parts crossing the border multiple times before a vehicle is completed. Food products moving back and forth. Energy flowing both ways.”
During my conversations with officials in both Ottawa and Washington, the emerging consensus is that Canada needs a multifaceted strategy rather than a single approach. “We need to be smarter than the U.S. is being right now,” a senior Canadian trade official told me, speaking on condition of anonymity because they weren’t authorized to discuss strategy publicly.
The playbook taking shape includes several potential countermeasures. First, Canadian officials are preparing targeted retaliation lists—what one insider called “pressure point tariffs” aimed at politically sensitive U.S. industries and regions. Unlike 2018’s dollar-for-dollar retaliation, strategists are considering asymmetric responses focused on maximum political impact with minimal self-harm.
“In 2018, we learned that putting tariffs on Kentucky bourbon and Harley-Davidson motorcycles got attention in Washington,” explained trade lawyer Cyndee Todgham Cherniak. “This time, Canada needs to be even more strategic, targeting industries in swing states that matter politically.”
The second approach involves challenging the tariffs through legal channels, including the USMCA dispute resolution mechanisms, the World Trade Organization, and potentially U.S. courts. While these processes are slow, they provide important legitimacy to Canada’s position.
“The U.S. can’t simply declare Canada a national security threat when we share the longest undefended border in the world and are integrated into North American defense systems,” said international trade lawyer Lawrence Herman. “That argument didn’t work last time, and it won’t work now.”
Walking through the Rideau Centre in Ottawa, I spoke with small business owners already anxious about what’s coming. “We just recovered from the pandemic, and now this?” said Marie Tremblay, who imports specialty foods. “Half my inventory comes from the U.S. I can’t absorb 20% higher costs.”
In Windsor, Ontario—where roughly 10,000 people cross the Ambassador Bridge daily for work—the anxiety is palpable. Auto parts manufacturer Jim Reynolds told me he’s already fielding calls from American customers asking about contingency plans. “They want to know if we can guarantee deliveries if tariffs hit. I honestly don’t know what to tell them.”
Perhaps most concerning is the growing sentiment among Canadian business leaders that diversification away from the U.S. market has become an urgent national priority rather than a long-term goal. The Comprehensive Economic and Trade Agreement (CETA) with Europe and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) suddenly look like critical lifelines rather than supplementary opportunities.
“We’ve been talking about diversification for decades, but the U.S. market is so large and accessible that progress has been incremental,” said Dennis Darby, CEO of Canadian Manufacturers & Exporters. “This crisis could force an acceleration of those efforts out of necessity.”
Former Canadian ambassador to the U.S., David MacNaughton, believes there’s still room for diplomacy. “Canada needs to remind Americans how integrated our economies are. This isn’t a zero-sum game. These tariffs would raise prices for American consumers and disrupt American manufacturers who rely on Canadian inputs.”
The Bank of Canada has already signaled it’s monitoring the situation closely, with economists speculating that tariffs could force additional interest rate cuts to offset economic damage. TD Economics estimates that broad-based tariffs could reduce Canadian GDP by 0.8-1.3% within a year of implementation.
For now, Canadian officials are working the phones with their American counterparts and allies, reminding them of the approximately 9 million U.S. jobs that depend on trade with Canada. They’re also emphasizing shared security concerns and Canada’s role in critical mineral supply chains essential to American manufacturing and defense industries.
“If we’ve learned anything from the past, it’s that Canada needs to stand firm while keeping communication channels open,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. “There are powerful interests on both sides of the border who understand the damage these tariffs would do.”
As one senior Ottawa insider put it to me: “We need to make clear that we’re prepared to defend our interests while simultaneously showing that we remain America’s best friend and most reliable trading partner. It’s a delicate balance.”
The irony isn’t lost on anyone—that the United States-Mexico-Canada Agreement, which Trump himself championed as a replacement for NAFTA, could be undermined by his own tariff policies less than five years after coming into force.
For ordinary Canadians already struggling with inflation and economic uncertainty, the prospect of a trade war adds another layer of anxiety to daily life. As the government formulates its response, the stakes couldn’t be higher for Canada’s economic future and its relationship with its largest trading partner.
