Trump 2.0 is set to upend US-Canada relations

Donald Trump is returning to the White House. Winning the presidency, along with control of the Senate and possibly the House of Representatives, means Republicans have a long runway for policy reform — which is making Canada nervous as the Trudeau government stares down possible challenges from the next administration on trade, defense, immigration, and more.

Trump’s tariff threat looms large

Sitting atop Canada’s pile of worries is Trump’s threat to impose a minimum 10% tariff — and possibly as high as 20% — across the board on US imports, which would drive consumer prices higher in the US and could cost Canadian trade partners billions. Canada will try to finagle an exemption, but there is no guarantee it’ll succeed.

If slapped with tariffs, Canada may be forced to retaliate with its own protectionist measures, ensuring a trade war. Roughly CA$3.6 billion in goods move across the border daily, and nearly 80% of Canada’s exports go stateside.

But tariffs aren’t the only trade concern. Trump, who views trade agreements through the lens of zero-sum power politics, says he will (once again) negotiate the US-Mexico-Canada free trade agreement, which comes up for review in 2026. During his first term, the Republican leader replaced the North American Free Trade Agreement with USMCA, which caused considerable headaches for the Trudeau government. Canada made concessions during the renegotiation, including increased market access for the US to Canadian dairy and stricter rules of origin for automobiles — criteria to determine if enough North American production has gone into a vehicle to grant it preferential tariff treatment. During the process, Trump called Justin Trudeau “two-faced” and a “far-left lunatic.”

Pressure to spend, border woes, freshwater demands — oh my!

Canada will also face growing pressure from the Trump administration to increase its defense spending and NATO commitments.

Days ago, former US Ambassador to Canada Kelly Craft gave a sense of just how urgent the spending boost might have to be. This summer, Canada released a plan to grow its share of defense spending to the NATO target of 2% of GDP by 2032. Craft says that’s not fast enough. But to hit that target, Canada would have to doubleits defense spending in the next seven to eight years, which might be tricky if the country is hurting from a trade war with its biggest trading partner.

During the election, Trump also said he would begin a program of mass deportations. The costly idea is a stretch, but as the CBC’s Evan Dyer argued in July, even the notion of such a program could cause problems for Canada, with concerned migrants in the US moving north ahead of a possible deportation blitz.

During the first Trump administration, and into the Biden administration, a growing number of irregular crossings were a challenge, leading to a renegotiated border deal in 2023, which tightened border security.

Trump has also talked about going after Canadian freshwater to solve US water shortages. Canada is one of the world’s largest sources of freshwater — with roughly 20% of the global total. Trump has floated the idea of diverting Canadian water to the US, particularly to drought-prone California.

The president-elect recently touted the idea on Joe Rogan’s podcast, and in September, he said British Columbia has “essentially a very large faucet” that could be turned on “one day” to divert water flows south to California. But there isn’t that much spare water to divert, and the flows are already governed by the Columbia River Treaty — another deal that might be up for (further) review.

All public smiles and reassurances, for now

The first Trump administration was rough for Canada, and the Trump-Trudeau relationship was … not warm. In January, Trudeau warned that a second Trump presidency would be “a step back” for Canada. “It wasn’t easy the first time, and if there is a second time, it won’t be easy either,” the prime minister said.

Indeed it won’t. Some in Canada may be hoping the pain won’t arrive until the 2026 free trade renegotiations, but that’s probably wishful thinking.

“The headaches may come much sooner than the USMCA negotiations," says Gerry Butts, vice chairman and senior adviser at Eurasia Group. “Trump’s immigration and tariff policies will put pressure on an already strained Canadian consensus about immigration and cause swift damage to the economy.”

Nonetheless, Trudeau was quick to congratulate Trump on his second win, emphasizing that the relationship between the US and Canada is “the envy of the world,” and saying, perhaps more in hope than in anticipation, that he knows he and Trump “will work together to create more opportunity, prosperity, and security for both of our nations.”

Canadian Foreign Minister Mélanie Joly noted that Canada has been preparing for either a Democrat or Republican “for months” through networks in the US and globally. She was joined by several Cabinet ministers who at least feigned hope that things would work out given the deep ties between the two countries.

Graeme Thompson, a senior analyst with Eurasia Group’s global macro-geopolitics practice, isn’t convinced the rosy picture the Canadian government is painting reflects reality. “Trump doesn’t care about historic ties; he couldn’t care less.”

Thompson says the relationship between the US and Canada is now as fraught as it has been in a century. But, he notes, Canada is still better off vis-à-vis the US than every other country in the world, which is something at least.

How to manage a forever crisis

The challenge for Canada now is navigating the second Trump administration, particularly as the Trudeau government, down in the polls, faces its own election a year from now — if not sooner.

Canadians prefer the Conservative Party leader over Trudeau when it comes to handling Trump, but for now, the job is Trudeau’s. The plan this time seems to be similar to last time: Rather than going all-in on the White House itself, Canada will work with the Trump administration by lobbying statehouses and governors, especially along the border states, along with Capitol Hill and industry. The government has also reestablished its Cabinet committee on US-Canada relations, chaired by Finance Minister Chrystia Freeland.

Thompson says Canada has an advantage in managing the Trump administration because of the country’s deep familiarity with the US and close connections nationally and at the state level. But history and expertise aside, there’s no guarantee there won’t be challenges and pain for Canada — especially on trade and defense — despite the rhetoric.

“It’s really hard to see how this is not more challenging than at any other time,” Thompson says. “I think that for the next four years, we can expect that any grievance or opportunity to take a hard line to gain something that presents itself, that’s the line the Trump administration will take.”