President Donald Trump has warned of 100% tariffs on Canada if it pursues trade deals with China, creating early tensions in the upcoming T-MEC review this year. The threat follows a limited agreement between Canada and China that cuts tariffs on food products and electric vehicles. Canadian officials maintain the deal aligns with T-MEC obligations.
On Saturday, January 24, Donald Trump criticized Canadian Prime Minister Mark Carney for expanding economic ties with China, stating Carney would be “very wrong” if he thinks the United States will allow Canada to become a gateway for Chinese products. Trump threatened 100% tariffs if Canada reaches a trade deal with Beijing.
Canadian Trade Minister Dominic LeBlanc countered that no free trade agreement with China is being sought. The deal announced on January 16 between Carney and President Xi Jinping settles tariff disputes: China lowers duties on Canadian food products, while Canada removes a 100% import tax allowing up to 49,000 Chinese electric vehicles annually, representing less than 3% of Canada's new car market.
Speaking to journalists in Ottawa on Sunday, Carney said tariffs are reverting to 2023 levels with the vehicle cap, coining the phrase “back to the future” for electric vehicles and agriculture. He affirmed it complies with T-MEC rules.
Trump's remarks introduce uncertainty into the mandatory T-MEC review, marking its sixth anniversary on July 1. Bloomberg-polled economists anticipate a positive outcome, but Manulife Investment Management strategist Dominique Lapointe noted it adds “downside risks” to formal talks. Canada relies heavily on U.S. exports, with existing tariffs on autos, steel, and aluminum already impacting its economy. Without T-MEC, effective tariffs could exceed the current 5-7% estimate.
Trump previously claimed the deal offers no real benefits to the United States, despite it being a key achievement of his first term. Business groups, including the auto sector, worry about disruptions to North American supply chains. The T-MEC allows annual reviews if not extended for 16 years, with a six-month withdrawal notice option.
