Federal cabinet braces for trade war as Donald Trump is inaugurated

Prime Minister Justin Trudeau delivers remarks before chairing the meeting of the Council on Canada-U. S. Relations, in Toronto, on Jan. 17, 2025. THE CANADIAN PRESS/Arlyn McAdorey

OTTAWA — Federal cabinet ministers are gathering in Montebello, Que., today as Donald Trump returns to the White House.

Trump has pledged to sign an executive order on inauguration day to impose 25 per cent tariffs on products from Canada and Mexico.

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When he first made the threat, the president-elect said the tariffs were a response to what he called inaction by both countries on keeping migrants and illegal drugs out of the United States.

The Liberal government laid out a $1.3-billion plan to beef up the border in December that includes extra police and border guards, helicopters, drones and drug-sniffing dogs.

Trump has since pivoted to saying the tariffs are being introduced because of the United States' trade deficit with Canada.

The federal government has prepared several plans to respond if the levies come into place today — plans that could include billions of dollars in retaliatory tariffs.

Two federal government sources who were not authorized to speak publicly about details of the plan say the government is waiting to see what happens Monday before revealing its response.

The sources say that if Trump sets the tariffs at 25 per cent, Canada’s opening salvo would be counter-tariffs worth roughly $37 billion, with a possible second wave of tariffs worth another $110 billion.

Prime Minister Justin Trudeau convened a meeting Friday of a newly formed advisory council on Canada-U. S. relations that includes former premiers, labour leaders and representatives of the auto industry.

Trudeau met with the country’s 13 premiers last Wednesday to discuss possible retaliatory actions.

At the end of those meetings, he and 12 premiers released a statement pledging to present a united front to their American counterparts.

Alberta Premier Danielle Smith broke with the group, refusing to sign on to the statement and posting on social media that she cannot support the “Team Canada” approach if energy exports could be part of the federal government’s response.

Trudeau has said everything must be on the table, including energy.

Trump repeatedly pledged throughout the presidential campaign to bring down the cost of gas and groceries for Americans.

Canadian officials have been travelling to Washington, D.C., in recent weeks to try to convince key Republicans that tariffs would accomplish the opposite of that.

Foreign Affairs Minister Melanie Joly told reporters on Friday that many lawmakers and Trump administration officials she’s met with in Washington have been surprised to learn about the possible impacts of Trump’s tariffs.

She told CNN that Canada is “pleading for peace.”

“At the same time, if Trump is going ahead with tariffs, he’s starting a trade war and of course we will retaliate,” she said, adding that it would increase the cost of groceries, home heating and gas for Americans.

This report by The Canadian Press was first published Jan. 20, 2025.

— With files from Kelly Geraldine Malone in Washington

Sarah Ritchie, The Canadian Press