Ottawa braces for potential Trump trade tax

A drastic Donald Trump campaign promise has got the feds in a frenzy (and no, it’s not about building a really big border wall). 

Driving the news: Over a dozen Canadian diplomats spent last week in Washington meeting with U.S. lawmakers to discuss the implications of a potential Donald Trump presidency. 

  • Their biggest worry? The Republican nominee’s (still vague) campaign trail promises to implement a 10% tax on all imports.

  • While it’s unclear if the tariff would apply to Canada given its free-trade agreement with the U.S., experts say it's a possibility. 

Why it matters: Roughly two-thirds of Canada’s global trade in 2022 was with the States. If Trump tries to slap a hefty tax on Canadian imports, it would be a five-alarm crisis for Canada’s economy.

  • Aside from China, Canada was the U.S.’s biggest source of imports last year, with US$429.6 billion worth of goods coming into the country across the northern border.

  • Canada’s energy sector — which sent US$131.91 billion worth of products to the States last year — would be hit particularly hard by a tariff.

Yes, but: Graeme Thompson, a senior analyst with Eurasia Group's Global Macro-Geopolitics practice, told The Peak that Trump might be inclined to preserve the United States-Mexico-Canada Agreement — particularly because he negotiated it.

  • Other experts argue Trump could simply use the threat of the global tax as leverage to get concessions from Canada and Mexico when the agreement is up for review in 2026.

Big picture: Even if Canada and Mexico dodge this proposed tax, the increasingly protectionist turn on both sides of the U.S. political aisle is going to be a headache for the foreseeable future.—LA