The United States and Canada have always had very good economic, defence, and cultural relations. They have fought two world wars together. Their heads of government have always worked together to improve the wellness of their respective citizens. Nowadays, the U.S.-Canada relations have never been so grim because Trump wants to greatly hurt the Canadian economy for no clear reason. As a result, the Trump administration seems to want to put an end to the traditional friendly relation between Canada and the U.S. Historically, Canada and the U.S. have had very close economic ties for more than 100 years. For instance, Canada and the U.S. trade close to $1 trillion in goods and services every year. President Trump thinks that Canada is unfair with American businesses because the Great North nation has a trade surplus with the U.S. For that reason, President Trump wants to put 25% tariffs on Canadian and Mexican imports in early February 2025. Consequently, these tariffs will have dire economic consequences on the Canadian economy. Moreover, Trump considers that putting tariffs on foreign imports is essential to fulfil his election promises made during his campaign because he needs to find new sources of income while decreasing income taxes. Trump might want to replace the federal income tax with tariffs. Moreover, Trump hopes to annex Canada through economic force by discouraging Canadians through an economic recession triggered by high tariffs on Canadian and Mexican imports.
To begin with, Trump is supported by several different political factions to make the Golden Age of America. These factions make the Make America Great Once Again movement, and they are at the basis of Trump’s victory in the 2024 presidential election. They want to end the progressive movements of the Obama and Biden eras. They prefer switching the nation to the America First Policies advocated by President Donald Trump. There is the American voter who wants that Trump to lower the cost of living. There are the tech billionaires who want to increase their wealth through political influence. An oligarch is taking shape in America through the Trump presidency. Finally, there is the MAGA movement, which wants to make America First policies and to settle the culture wars. These factions are completely different, and it is very unlikely that Trump keeps these factions happy and united for the next four years. As a result, Trump needs to please all of these factions by decreasing the federal income tax, by strengthening American identity, and by promoting America-based businesses.
Furthermore, President Trump wants to renegotiate the 2018 USMCA Trade Agreement upon taking office in January 2025. "I am announcing today that upon taking office, I will formally notify Mexico and Canada of my intention to invoke the six-year renegotiation provisions of the USMCA that I put in," Trump told the Detroit Economic Club in Octobre 2024. President Donald J. Trump thinks that the current North American Free Trade Agreement does not favour America. Trump considered the 1994 NAFTA agreement as the worst trade deal ever; nevertheless, Trump is no longer satisfied with his own trade deal with Mexico and Canada that he signed in 2018. Trump wants to take advantage of the USMCA review scheduled in 2026 to get more concessions for America at the expense of Mexico and Canada. It is unclear what Trump wants to improve in the U.S.-Canada-Mexico trade deal, but Trump wants concessions in the auto industry, on dairy quotas, and on softwood lumber. He wants that USMCA better reflects his political views and ideals. We can expect that Canada and Mexico work very hard to meet Trump’s demands to keep the USMCA trade agreement effective. 30% of world’s economy accounting for about U.S. $31 trillion, depends on the U.S. Mexico Canada Trade Agreement.
In addition, President Trump will put 25% tariffs on all Mexican and Canadian imports, which could trigger an economic crisis in Mexico and Canada. President Trump argues that these two nations do not protect their borders, which allows fentanyl to illegally enter American territory. Canada and Mexico intend to introduce tariffs on U.S. imports as well if Trump decides to start a trade war. U.S. exports make up 32% of the Mexican GDP, while U.S. exports make up 21% of the Canadian GDP. Therefore, Trump’s tariffs will likely trigger an economic recession or depression if, on February 1st, 2025, Trump puts tariffs on his most loyal economic allies. Canada and the U.S. trade close to a trillion dollars of goods and services. 80% of all Canada’s exports head to the U.S. and Trump’s tariffs will greatly damage Canada’s economy. The purpose of these tariffs is to punish nations with a trade surplus with the United States; however, Trump’s ideal would be replacing the income tax with tariffs. President Trump told CNN in October 2024 that: “When we were a smart country, in the 1890s … this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax.” Thus, Trump has an economic plan, but his strategy is unrealistic, and its implementation can never reach its goals. Still, Trump wants to try to find ways to replace some of the federal income tax with tariffs.
Likewise, we can expect a significant decline in U.S.-Canada economic trade. The Bank of Canada projects a significant decrease in U.S. demand for Canadian goods and services. Also, U.K. Sky News reveals in late January 2025 that the U.S. imports 436 billion of Canadian goods, 509 billion of Mexican goods, and 412 billion of Chinese goods. America's main imports from Mexico are cars. Trump criticizes China for exporting car parts to Mexico to avoid U.S. tariffs, which annoys Trump. On the other hand, Trump argues that Canada has a trade surplus with America and that Canada let fentanyl be smuggled to the U.S. However, the real purpose of these tariffs is that President Trump wants to replace the federal income tax with tariffs. Still, Trump’s decided to put a 25% tariff on several Canadian and Mexican imports. We can expect that Trump’s decision will trigger an economic recession in North America. The economic consequence of these tariffs will be that Canada will suffer from a decrease in production. Moreover, we can expect an increase in unemployment of at least one percent. In sum, Canada’s GDP could shrink by as much as 3%, which will trigger an economic recession. In contrast, U.K. Sky News reveals that Mexico’s GDP will shrink by 4.5%. Thus, high tariffs will be felt throughout the North American economy and American consumers will have to pay for them while thousands of jobs will be lost in the three North American countries.
As well, Trump’s global policies will be a challenge for Canada and Mexico because Trump is very unpredictable. President Trump’s decision-making and behaviour are often volatile and unpredictable for most politicians and foreign leaders. During his first term in office, Trump made other leaders think that he is unpredictable and dangerous to secure better terms of cooperation. Trump’s foreign policy has been inspired by President Nixon’s madman theory. Nixon tried very hard to make leaders of communist nations think that he was irrational and volatile so they would fear the U.S. President Trump’s first term has been inspired by Nixon, and this allowed him to renegotiate trade deals with Canada and Mexico. During his first term, Trump threatens several nations to get concessions in terms of trade negotiations, prisoners' releases, and military deals. Nowadays, Trump threatens 25% tariffs on Canadian and Mexican imports to renegotiate the North American trade deal.
Finally, Trump’s economic policy with Canada and Mexico is very irrational through tariffs. The U.S. head of state thinks he could force Canada and Mexico to pay for his federal income tax cuts. Moreover, Trump hopes that Canadians lose hope in the economic possibilities of their nation and they decide to join the U.S. as the 51st state. It is very unlikely that an economic recession will push Canada to give up their sovereignty and to join the Union of the United States. Canada’s Ontario Premier Doug Ford told Fox News that Canada is not for sale, and it will never be for sale. All levels of government are united to fight Trump’s tariffs with retaliatory tariffs on U.S. imports. We can expect that Canada’s GDP shrinks by 3% if both nations go full steam in a trade war in 2025. In sum, President Trump wants to cause real economic damage to America’s most loyal economic and defence partner. There will be negative consequences for America for doing this. Canada and its allies could likely cause economic damage to America as well. Trump wants to end the traditional economic and defence alliances made after World War 2. He wants to end the same global order that America made at the end of the 1940s. America will pay a steep price if it puts tariffs on its most loyal allies. Likewise, Trump will end the U.S.-Canada Free Trade Agreement by signing an executive order. The U.S. President decides to simply end a tradition of free trade and economic cooperation dating back to the Reagan-Mulroney era. Yet, the U.S.-Canada Free Trade Agreement was highly criticized by politicians concerned with the potential outcome on Canada’s economic sovereignty by the 1988 free trade deal. In 1988, Liberal Leader John Turner once told Brian Mulroney: ¨I happen to believe you have sold us out.¨ John Turner tried to convince Canadians that the U.S.-Canada free trade deal could jeopardise Canada’s sovereignty, and this could have drastic effects in the future; as a result, U.S. President Donald Trump takes advantage of Canada’s economic weaknesses in order to destabilise the economic and political stability of Canada.
February 1st, 2025