The exit that nobody saw coming. Justin Trudeau’s final days as Canada’s prime minister could be tumultuous if President Trump follows through on his plan to impose a 25 percent tariff on Canadian exports this Tuesday.

Efforts by Canadian officials, who spent last week in Washington to prevent the president’s tariffs which will also apply to Mexico, so far have been unsuccessful. If tariffs are implemented, there is a possibility of retaliation from Canada, sparking a trade war.

Trump has given various reasons for the tariffs, which were initially set to begin on February 1 but delayed for 30 days. He asserts that the United States has been destabilized by unauthorized migrants and fentanyl crossing the border from Canada and Mexico. U.S. government data, however, does not support these claims.

Trump has also accused the U.S. of subsidizing Canada by providing billions of dollars annually, for which he has presented no evidence. He has been urging companies to move their plants from Canada to the U.S. and has complained about Canada’s trade surplus with the U.S., which was mostly due to oil and gas exports, totaling $63 billion last year.

There is a unanimous agreement in Canada that tariffs would significantly harm the country’s economy, which relies heavily on exports and industries intertwined with the American market.

Jean Simard, the president of the Aluminium Association of Canada, recalled the effect of a 10 percent U.S. tariff on Canadian aluminum exports during the first Trump administration.

“The 10 percent tariffs years ago were highly disruptive,” Mr. Simard said. “Twenty-five percent tariffs will be highly destructive.”

Border Response

Only 19 kilograms of fentanyl were intercepted last year at the Canada-U.S. border, compared with almost 9,600 kilograms at the border with Mexico, according to U.S. Customs and Border Protection. Furthermore, an investigation by The Globe and Mail found that the Canadian figure was inflated by the inclusion of non-border related seizures.

In the 2024 fiscal year, U.S. authorities detained roughly 24,000 individuals crossing illegally from Canada into the United States, compared to over two million at the southern border.

However, Mr. Trudeau’s government acted swiftly to address Mr. Trump’s concerns about these issues by investing 1.3 billion Canadian dollars (approximately $900 million) in a series of measures to strengthen the border.

These measures included appointing a “fentanyl czar”, providing the Royal Canadian Mounted Police with two Black Hawk helicopters for border surveillance, assigning a large number of its officers to border patrol, and purchasing a variety of electronic surveillance devices, including drones.

The increased border security has resulted in a small number of individuals being apprehended attempting to enter Canada from the United States.

Although Mr. Trump stated last week that he had seen improvement in migration at both borders, he added that he was dissatisfied with how Canada and Mexico dealt with fentanyl smuggling.

Although Mr. Trump insists that Canadian exporters will cover the cost of the tariffs, the levies would have to be paid by American importers. It is unclear if they would be able to recover this cost from Canadian companies.

Economists overwhelmingly agree that the result would be inflation and supply disruption in the United States, while Canadian industries could undergo significant layoffs.

Mr. Simard noted that just the threat of tariffs had already substantially increased the cost of aluminum in North America. If tariffs come into effect, he estimates that the resulting aluminum price increases would add about $3,000 to the cost of manufacturing a Ford F-150 pickup truck.

Automotive trade between the two nations is nearly balanced, and many auto parts cross the border multiple times before ending up in an assembled vehicle.

A 25 percent tariff across the Mexico and Canadian border will create an unprecedented hole in the U.S. industry, as stated by Jim Farley, the CEO of Ford Motor Company. Automotive trade executives predict that parts suppliers would halt shipments, causing factories in all three countries to close quickly, resulting in thousands of layoffs.

American farmers would also face higher prices for potash, an essential fertilizer. Approximately 80 percent of potash in the United States originates from Canada due to limited U.S. reserves.

Mr. Trump repeatedly suggests that the easiest way for Canada to avoid tariffs is to become the 51st U.S. state. His calls for Canada’s annexation, as well as his repeated denigration of it as a viable nation, have enraged many Canadians. This has led to calls to boycott American goods, cancellations of U.S. vacations, and renewed affection for the maple leaf flag.

Mr. Trudeau has stated that Canada is prepared to respond with tariffs on U.S. imports. Initially, it will target $30 billion worth of products, including Kentucky bourbon, from Republican states whose elected officials could potentially influence Mr. Trump.

There have been proposals to halt shipments of oil, gas, and electricity to the United States or impose substantial export taxes on these products. However, the enforcement of these tariffs through the disagreement settlement mechanism of the free-trade agreement among Canada, Mexico, and the United States could take years, and it is uncertain if Mr. Trump would acknowledge any ruling against the U.S.

More to Come

Canada may also face a worldwide 25 percent tariff on steel and aluminum that Mr. Trump has suggested. Canada is the largest foreign supplier of these materials to the United States, and it has been hinted that these tariffs will be piled on top of the 25 percent tariff expected to be introduced this Tuesday.

He has also discussed the creation of specific tariffs against automobiles and copper.

Next month, Mr. Trump plans to introduce a worldwide reciprocity-based tariff system. This system would levy tariffs based on other countries’ policies affecting trade with the United States, such as tariffs, taxes, and subsidies. These were the terms of the trading relationship between Canada and the U.S. in the 19th and early 20th centuries.

The potential impact on Canada remains uncertain. Given the free-trade agreement between the three countries, Canada imposes relatively few tariffs on American goods, so reciprocal tariffs from Washington would be similarly limited. The tariffs that Canada does levy are mainly on dairy, poultry, and eggs.