Canada says it can help U.S. reach its ‘golden age’

Faced with an imminent tariff war with the United States, Prime Minister Justin Trudeau has threatened to use the stick. He now hopes that the carrot will do the trick.

Changing tone from his previous warnings about economic difficulties, the Canadian leader promises to help Donald Trump reach America’s “golden age”, mentioned in the US president’s inauguration speech .

“Canada is a safe, secure and reliable partner in an uncertain world,” Trudeau said this week. The alternative, he said, “would be more resources from Russia, China or Venezuela.”

A focus on U.S. prosperity and national security is the latest pivot from Canadian officials as the country tries to find its place with the new Trump administration and, more urgently, avoid the threat of tariffs general customs duties of 25% imposed by the United States, its largest country. closest trading partner and ally.

Canada has been preparing a response for weeks and was ready to launch a potentially devastating trade war as soon as President Donald Trump took office.

On Monday, it looked like Canada had gotten a reprieve. In his inaugural address, Trump made no mention of Canada. But the relief was short-lived. In an off-the-cuff response to a reporter’s question in the Oval Office Monday evening, Trump turned the tables by considering imposing high taxes on February 1 on Canada and Mexico.

Now that a deadline is approaching, Canada must decide which tactic to adopt: retaliation or appeasement.

In its tougher approach, Ottawa is considering targeted tariffs in exchange for products like Florida orange juice – to send a message directly to Trump – as well as a dollar-for-dollar response. It’s an approach that worked during Trump’s first term when he imposed tariffs on Canadian steel and aluminum.

This time, however, the US president’s goals and timetable are less clear, and Canada has struggled to find an answer. What makes things even more difficult is the lack of consensus among Canadian officials on how to respond.

Trudeau, who is deeply unpopular and will soon resign, has repeatedly signaled that everything is on the table, including the “nuclear option” to tax or embargo energy exports to the United States. Not all agree, with Premier Danielle Smith of oil-rich Alberta vehemently opposing the use of energy as a currency.

Both Trudeau and Smith personally traveled to Florida to appeal directly to Trump.

In his remarks Tuesday, Trudeau seemed slightly exasperated.

“We’ve been here before,” he told reporters. “The first Trump presidency represented times of uncertainty and threats of instability that we were able to overcome constructively.”

Meanwhile, Canada’s ambassador to Washington DC, Kirsten Hillman, signaled that the country may be closer to understanding the Trump administration’s position.

“We have now moved from a more abstract discussion to a more concrete discussion,” she said, referring to the “America First” trade study ordered by Trump on Monday.

It lays out U.S. trade priorities — many of which center on national security — and Trump chooses who will lead that review. Among them are Scott Bessent, nominated for Treasury Secretary, Howard Lutnick for Commerce and Jamieson Greer for the post of US Trade Representative.

All still need to be confirmed by the U.S. Senate.

The tariff threat has caused deep unease within trade-dependent Canada. Around 75% of its exports go south. On the other hand, Canada represents a much more modest share, i.e. 17% of American exports.

“The United States can afford to have a long trade war with Canada, and Canada is less so,” Theo Argitis, managing director of public affairs firm Compass Rose Group, based in Ottawa.

“There is this asymmetry there which places Canada in a very difficult negotiating position.”

Trump initially linked the tariffs to border security, saying they would be implemented until Canada and Mexico took steps to limit the flow of fentanyl and illegal migrants into the United States.

In a bid to avoid tariffs altogether, Ottawa had promised to implement new security measures worth C$1.3 billion ($900 million; £700 million) along the its American border.

But that doesn’t seem enough, as Trump doubled down on his threats, accusing Canada on Tuesday of allowing “millions” of people to enter the United States illegally.

Trump has also criticized Canada for its defense spending and what he sees as a trade deficit between the two countries.

Experts say the deficit is due to a number of factors, including the fluctuating price of energy, one of the main products Canada sells to the United States.

Disagreements have also been reported within Trump’s orbit over when and how to implement the tariffs.

In a call with reporters before the president’s inauguration, Canadian Energy Minister Jonathan Wilkinson said there was uncertainty about Trump’s ultimate goals.

This “uncertainty and chaos” is often used by Trump as a negotiating strategy, Mr. Argitis noted.

“If he scares us, he probably thinks we’ll be willing to concede things. He may or may not be there,” he said.

The tariffs appear to be part of a broader policy stance by Trump, a self-described “tariff man” who has also threatened to tax Chinese, European and Russian exports.

He announced his intention to create a foreign revenue service to collect “revenues linked to foreign trade”, including those generated by customs duties.

The Trump administration is also reviewing a long-standing free trade agreement between Canada, the United States and Mexico ahead of its planned renegotiation in 2026. Sources have told US media that Trump wants to start those negotiations sooner.

The situation – and the uncertainty surrounding it – leaves Canada with few options.

Economists have warned that Canada’s GDP could suffer a decline of up to 5.6% if across-the-board 25% U.S. tariffs are imposed on Canadian products, depending on how and if Canada retaliates. .

Given this, Artigis said Canada is primarily focused on avoiding tariffs altogether, entering into a stronger alliance with the United States in the areas of energy and national security.

Canada also talks about diversifying its trade to reduce its heavy dependence on the United States as a partner, but Artigis noted that the country has struggled to achieve this in the past, mainly due to of its geographical and cultural proximity to the United States.

“There’s no evidence that Canada is capable of diversifying, and so we’re sort of stuck with option number one, which is to avoid a trade war at all costs,” he said.

Ultimately, he added, the advantage in the negotiations goes to Trump.