Tuesday | May 6, 2025
Canadian Prime Minister Mark Carney is scheduled to meet with U.S. President Donald Trump at the White House on Tuesday, in what is shaping up to be one of the most fraught and high-stakes encounters between the leaders of the two neighboring countries in recent memory. The meeting comes at a time of heightened tensions, following months of deteriorating relations fueled by economic disputes and political friction.
Canada has long been one of the United States’ most reliable partners — not only as its second-largest trading partner, but also as a close ally in areas ranging from defense and intelligence-sharing to climate cooperation and border security. This historically warm relationship has been tested like never before in recent months, however, as President Trump has launched a series of aggressive tariffs on Canadian goods, part of his broader effort to reshape global trade on terms more favorable to the U.S. The result has been a sharp diplomatic chill and growing economic uncertainty on both sides of the border.
Ironically, Trump’s hardline approach has had an unintended political consequence north of the border: it has significantly boosted Prime Minister Carney’s domestic standing. Just last week, Carney’s Liberal Party secured a decisive victory in Canada’s federal elections, with voters rallying behind his promise to stand firm against American pressure and assert Canada’s economic sovereignty. In a bold and unapologetic post-election address, Carney denounced the Trump administration’s actions, stating, “We are over the shock of the American betrayal, but we should never forget the lessons.”
The bilateral free trade relationship between the U.S. and Canada has been a cornerstone of North American prosperity for decades, enshrined in agreements such as NAFTA and its successor, the USMCA. Trump’s sweeping tariffs, however — imposed under the guise of national security concerns — have disrupted that delicate balance and ignited retaliatory measures from Ottawa. The fallout has affected key industries on both sides of the border, from auto manufacturing and agriculture to steel and aluminum.
American businesses and consumers have not been spared from the pain. The trade war’s ripple effects have led to supply chain disruptions, rising costs, and mounting pressure on U.S. exporters. Even within the Trump administration, there are signs of strain. In an appearance on Fox Business on Monday, U.S. Commerce Secretary Howard Lutnick acknowledged the challenges ahead, admitting that while a new trade agreement with Canada remains on the table, any potential deal would be “very complex” and difficult to finalize in the current climate.
As Carney prepares to confront Trump in Washington, the stakes could not be higher — not just for the future of U.S.-Canada relations, but for the broader global order that depends on stable and predictable economic partnerships. What transpires behind closed doors at the White House may well define the next chapter of North American diplomacy.
Escalating trade tensions
Until just a few months ago, the economic relationship between the United States and Canada was governed by the United States-Mexico-Canada Agreement (USMCA), a modernized free trade deal brokered by President Trump during his first term and ratified in 2020. The USMCA replaced the North American Free Trade Agreement (NAFTA), which had underpinned trade across North America for more than 25 years. Designed to bring trade regulations into the 21st century, the USMCA was hailed by Trump as a signature accomplishment. But in a dramatic reversal, he has since upended the very deal he once championed.
In early March of this year, President Trump imposed a sweeping 25% tariff on all imports from Mexico and Canada — a move that stunned allies and markets alike. Though the blanket tariff was suspended within weeks after leaders from both countries pledged greater cooperation on issues such as fentanyl trafficking and illegal immigration, the damage to diplomatic trust had already been done. What’s more, a 25% tariff remains in place on goods that fail to meet USMCA compliance standards, further muddying the waters of cross-border commerce.
The trade tensions have only escalated since then. Trump has expanded tariffs to include all imported cars, steel, aluminum, and auto parts — a move that has drawn sharp criticism not just from Canada and Mexico, but also from American industry leaders. Canada, for its part, has responded in kind. Ottawa announced a retaliatory 25% tariff on C$30 billion (roughly $22 billion USD) worth of American imports, followed by another 25% duty on C$29.8 billion in response to Trump’s metal tariffs. Canadian officials have also slapped new tariffs on U.S.-made automobiles, further escalating the economic confrontation.
The implications of this tit-for-tat trade war are enormous. Canada is America’s largest export market, purchasing $349.4 billion worth of U.S. goods in 2024 alone — with energy products, automobiles, and machinery topping the list. Canada accounts for 14% of total U.S. trade, making it a vital component of the American economy. Conversely, the United States is Canada’s top export destination, buying more than 75% of Canadian exports, including softwood lumber, aluminum, and steel. U.S. construction firms, for example, rely heavily on Canadian softwood lumber, which makes up over 80% of imported supply and about 30% of total U.S. consumption.
The fallout is being felt across the American economy. General Motors CEO Mary Barra recently told CNN that the tariffs could cost her company between $4 billion and $5 billion this year due to increased input costs and supply chain disruptions. Small businesses are also bearing the brunt. Beth Fynbo Benike, owner of Minnesota-based baby product company Busy Baby, said her next shipment of inventory will cost nearly $230,000 — a staggering increase caused directly by new tariff rules.
Beyond industry, the economic chill is affecting tourism and consumer sentiment. According to the Federal Reserve’s most recent Beige Book, retailers and hospitality providers in regions near the Canadian and Mexican borders, such as Northern Washington and Southern California, have reported significant declines in cross-border tourism. Canadian visitors, once a reliable source of revenue for local economies, are increasingly staying home or spending their money elsewhere.
That consumer resistance extends to purchasing habits as well. Canadians are increasingly shunning American products in favor of alternatives from Europe or domestic producers. Shoppers are choosing Italian tomatoes over Californian ones, locally sourced meats over U.S. brands, and even switching from Coca-Cola to Canadian-made sparkling water sweetened with maple syrup. For many Canadians, this is about more than just dollars and cents — it’s about national dignity.
“We, as Canadians, we don’t go out and try to create fights,” said Dylan Lobo, a Toronto entrepreneur who runs the online business directory Made in Canada, in an interview with CNN. “It’s an attack on Canada.”
As Prime Minister Carney prepares for his high-stakes meeting with President Trump, he carries with him not only the weight of Canada’s economic interests, but also a growing sense of national resolve — a determination to defend Canadian sovereignty in the face of an increasingly combative neighbor.