Trump’s tariff threats may push Canada to trade more with China, a strategy that could backfire

Prime Minister Justin Trudeau entered office eager to sign a trade deal with China. Since that effort failed his government has grown increasingly critical of Beijing.STR/AFP/Getty Images
U.S. President Donald Trump’s pledge to levy punishing new tariffs on Canada has prompted calls for Ottawa and the provinces to turn to other markets. But any bid to do more business with Canada’s second-largest trading partner, China, may create a new set of problems by further angering a U.S. administration determined to curtail Beijing’s economic and political influence, including among America’s neighbours.
Mr. Trump has returned to the White House with a litany of complaints about Canada, decrying the arrival of fentanyl and illegal migrants from the other side of his country’s northern border – despite evidence that neither are doing so in large numbers – and speaking out against what he calls a large trade imbalance between the two countries. He has said he will impose 25-per-cent tariffs on Canadian and Mexican imports on Feb. 1 and has ordered a sweeping review of U.S. international trade agreements, including the United States-Mexico-Canada Agreement.
But “this whole thing about revisiting the USMCA has to do with China and not Canada, per se,” said Dan DiMicco, a former steel executive who was an adviser to Mr. Trump during his first presidential campaign but is not involved with the current administration and does not speak for the President.
What Mr. Trump “is really saying is: Stop doing business with the Chinese Communist Party,” he said. “Stop importing the fentanyl from China. Stop being a resource provider to China. Stop being friends with CCP China. That’s what he’s asking most of all.”
The first Trump administration already attempted to circumscribe North America from China. The USMCA includes a provision that allows for its effective cancellation if any signatory signs a free-trade agreement with a “non-market country.”
Prime Minister Justin Trudeau entered office eager to sign a trade deal with China. But that effort failed, and his government has grown increasingly critical of Beijing. In October, Canada imposed 100-per-cent tariffs on Chinese-made electric vehicles, aligning itself with a similar U.S. policy. Ottawa also imposed a 25-per-cent surtax on aluminum and steel from China.
Still, the Chinese government has said it is open to discussing greater trade ties with Canada.
But while Canada’s trade with China has remained largely stable, U.S. imports of Chinese goods fell by a third from 2017 to 2023 after Mr. Trump imposed tariffs in his first term that were largely upheld by President Joe Biden.
Trump doubles down on 25% tariffs for Canada and Mexico, ordering sweeping review of trade policies
Canada’s trade with the U.S. is worth eight times its trade with China.
In some conservative circles in the U.S., Mr. Trudeau is seen as insufficiently willing to challenge Beijing at a moment when the new leadership in Washington has made China a key area of focus.
Mr. Trump has warned that the U.S. is prepared to undergo a sweeping separation of its economy from Canada’s, blaming the U.S.’s northern neighbour for taking advantage of their relationship in trade.
Canada does enjoy an enormous trade surplus with the U.S. – by some estimates, as much as $100-billion – but it’s based largely on the value of Canadian oil, which makes up roughly 60 per cent of U.S. imports.
On Thursday, however, Mr. Trump declared that the U.S. has no need of fossil fuels, lumber or cars from Canada.
Tomas Philipson, a former acting chair of the Council of Economic Advisers, which advises U.S. presidents, has likened Mr. Trump’s wielding of potential tariffs to the country’s arsenal of nuclear weapons, which the U.S. has not actually deployed since the Second World War. “But it’s been a great threat to get people to do what we want,” he told Fox News this month.
Similar logic informs the use of tariffs, he said.
“The threat here is obviously economic harm through tariffs. That doesn’t mean you use it. Ideally, you don’t,” he told the BBC.
For Canada, however, part of the difficulty has come in trying to discern which of Mr. Trump’s tariffs are intended to secure which outcomes.
“He is speaking to a broad swath of grievances from different corners of America,” said Zach Mottl, the president of Illinois-based Atlas Tool Works Inc. He chairs the Coalition for a Prosperous America, which has advocated for universal U.S. tariffs.
“Fentanyl is an issue. Immigration is an issue,” Mr. Mottl said. “But also trade and China are issues. The hollowing out of the American middle class and national security and manufacturing is an issue.”
He faults Canada and Mexico for enabling China’s tariff circumvention.
The Biden administration, for example, complained that Chinese companies were using Mexico to transship auto parts, steel and even xanthan gum into the U.S.
Canada, too, should be vigilant about Chinese transshipment, said Andrea van Vugt, a trade adviser to former prime minister Stephen Harper.
“It’s really important for Canada to pay attention to – and superimportant for Mexico to pay attention to – the way that countries like China are finding access to the United States through Canada or Mexico,” said Ms. van Vugt, who is now the chief operating officer of Wellington Advocacy, a government relations and strategic communications company.
Mr. Trump’s concerns, she said, should be understood as a bid to eliminate threats to U.S. security, including economic security.
The challenge of understanding the intentions of the Trump administration is complicated by how little attention has been paid to Canada by key figures. Take Jamieson Greer, Mr. Trump’s nominee for U.S. Trade Representative, a pivotal role in overseeing tariffs and trade.
The Globe and Mail was unable to find public comments about Canada made by Mr. Greer.
He has, however, spoken extensively about China. Last May, in testimony to the U.S.-China Economic and Security Review Commission, he called Chinese ambitions a generational challenge for the United States, saying the trade relationship with China has “actively harmed U.S. economic and national-security interests.” In 2023, he told a subcommittee on trade that jobs lost to China have led to an increase in U.S. “deaths of despair” and said the U.S. response to China “should occur in the context of countering unfair trade practices from other economies as well, both friend and foe.”
Mr. Trump’s first days in office have been notable for the warm tone he has adopted toward China, an adversary, relative to the hostility he has shown Canada, among his country’s closest allies. “I like President Xi very much,” Mr. Trump said this week, after granting Chinese-owned social-media platform TikTok a 75-day reprieve from a U.S. ban. Canada, by contrast, “has been very tough to deal with over the years.”
Douglas Rediker, a Washington-based political strategist, says the dissonance stems in part from Mr. Trump’s affection for strongman leaders and disdain for the procedure-driven order of parliamentary democracies. “Canada is the closest North America gets to Europe, and he hates Europe,” said Mr. Rediker, who was nominated by then-president Barack Obama to the executive board of the International Monetary Fund and led an international economic-policy group for the Biden campaign.
There is little logical basis, he said, to argue that Canada is beholden to the whims of the Chinese state. There is also no evidence that Canada is a major source of fentanyl or illegal migration into the U.S. Any trade imbalance, meanwhile, comes largely from exports of Canadian oil that U.S. Midwestern refineries have been built to process. Place tariffs on that crude and “both sides lose,” Mr. Rediker said.
The problem for Canada, then, is how to respond to the complaints Mr. Trump has enunciated.
“I don’t really understand, nor do I think Trump has a full grasp of, what his frustrations are with Canada,” Mr. Rediker said. “Which makes it hard if not impossible for Canada to fully address them.”
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