President Donald Trump has reiterated his threat to impose tariffs on Canada, saying it can be avoided if the neighbouring nation chose to “become a state” of the US.
Addressing global business leaders at the World Economic Forum, Trump complained of a “tremendous” trade deficit with Canada and said the US does not need Canadian energy, vehicles or lumber.
“You can always become a state, and if you’re a state, we won’t have a deficit. We won’t have to tariff you,” he said to gasps in the hall in Davos.
Trump has threatened to impose up to 25% tariffs on Canadian imports, possibly by 1 February.
The renewed threat of tariffs has been met with deep unease by the trade-dependent Canada.
But it has also said it will consider significant countermeasures, including a “dollar-for-dollar” response if the Trump administration follows through.
Roughly 75% of Canada’s exports head south. In contrast, Canada accounts for a much smaller 17% of US exports, though it is the second largest US trading partner, behind Mexico.
Trump in his remarks on Thursday said Canada had been “very tough to deal with over the years”.
“We don’t need them to make our cars, we make a lot of them, we don’t need their lumber because we have our own forests… we don’t need their oil and gas, we have more than anybody,” he told forum attendees via video link from Washington DC.
Trump reiterated the assertion that the US has a trade deficit with Canada of between $200bn and $250bn. It’s not clear where he got that figure.
The trade deficit with Canada – expected to be $45bn in 2024 – is mostly driven by US energy demands.
The North American auto industry also has highly integrated supply chains.
Auto parts can cross the borders between the US and Mexico and Canada multiple time before a vehicle is finally assembled.
Trump has also tied the tariffs to border security, saying it will be imposed unless Canada increases security at the shared border.
Canadian Prime Minister Justin Trudeau has repeatedly said that everything is on the table in response if the tariffs are imposed.
That includes a tax or embargo on energy exports to the US, though some of Canada’s provincial leaders disagree with that response.
On Thursday, Trudeau told reporters that Canada’s goal is to avoid US tariffs altogether but it will step up its response “gradually” to seek the quick removal of levies if they are imposed.
Canada is also pitching itself as a reliable trading partner and a secure source to the US for energy and critical minerals as it lobbies American lawmakers in a bid to avoid the tariffs.
Economists suggest the US depends on Canadian products for energy security.
In 2024, Canadian energy exports came to almost $170bn (C$244bn), according to a recent analysis by TD Bank economists.
Trump also said on Thursday that businesses should make their products in the US if they want to avoid tariffs.
Tariffs are a central part of Trump’s economic vision – he sees them as a way of growing the US economy, protecting jobs and raising tax revenue.
The new president has ordered federal officials to review US trade relationships for any unfair practices by 1 April.
With reporting from Faisal Islam, economics editor, in Davos.
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