Trump Threatens Canada with 100% Tariffs Over Potential China Trade Deal in 2026

• What Prompted Trump’s Latest Tariff Threat?
• How Has Canada Responded?
• Historical Context: A Pattern of Trade Brinkmanship
• What Are the Potential Economic Impacts?
• Could This Derail USMCA?
• Global Reactions: Who Stands to Gain?
• What’s Next for Canada?
• Investor Takeaways
• FAQ

In a bold move that could escalate trade tensions, former U.S. President Donald TRUMP has warned Canada of imposing 100% tariffs on all imports if Prime Minister Mark Carney proceeds with a trade agreement with China. The threat, made on January 24, 2026, during the World Economic Forum in Davos, Switzerland, underscores the fragile state of North American trade relations. This article delves into the implications of Trump's warning, the historical context of U.S.-Canada trade disputes, and the potential fallout for global markets.

What Prompted Trump’s Latest Tariff Threat?

Trump’s warning comes amid rumors of Canada negotiating a bilateral trade deal with China, a MOVE that could sideline U.S. economic interests. "If Canada signs this deal, they’ll regret it," Trump declared, flanked by advisors in Davos. His rhetoric echoes the 2018-2019 U.S.-China trade war, where tariffs became a weapon of choice. Analysts from BTCC note that such threats often aim to rally political support rather than enact policy, but the markets aren’t taking chances—the Canadian dollar dipped 0.8% following the statement.

How Has Canada Responded?

Prime Minister Mark Carney, also in Davos, dismissed the threat as "economic posturing." Speaking at a panel on January 20, Carney emphasized Canada’s right to diversify trade partnerships, citing the 2020 USMCA renegotiation as proof of resilience. "We won’t be bullied into choosing between allies," he asserted. Behind the scenes, however, Ottawa is reportedly accelerating talks with the EU as a contingency.

Historical Context: A Pattern of Trade Brinkmanship

This isn’t Trump’s first rodeo with Canada. In 2018, he slapped tariffs on Canadian steel and aluminum, citing national security—a move later rolled back after backlash. "The ‘America First’ playbook hasn’t changed," says a BTCC market strategist. Data from TradingView shows that cross-border trade dipped 12% during the 2018 spat but recovered within a year. This time, the stakes are higher: China is Canada’s second-largest trading partner, with $100 billion in annual exchanges.

What Are the Potential Economic Impacts?

A 100% tariff would devastate sectors like automotive (20% of Canada’s exports to the U.S.) and agriculture. The Bank of Canada might intervene with rate cuts, warns a Reuters source. Meanwhile, cryptocurrency markets—often a haven during trade wars—saw bitcoin rise 3% post-announcement, per CoinMarketCap. "Investors are hedging against volatility," notes an analyst.

Could This Derail USMCA?

Unlikely, but not impossible. The 2020 USMCA agreement includes a clause allowing renegotiation if a member enters a deal that "undermines the spirit" of the pact. Legal experts debate whether a China-Canada deal qualifies. "It’s a gray zone," admits a trade lawyer interviewed by Bloomberg.

Global Reactions: Who Stands to Gain?

Europe and Mexico could benefit as U.S. importers seek alternatives. The euro gained 0.5% against the CAD after Trump’s remarks. "Trade wars create unintended winners," quips a Deutsche Bank report. Meanwhile, China’s state media framed the threat as "proof of U.S. hegemony," potentially strengthening Beijing’s hand in negotiations.

What’s Next for Canada?

Carney faces a tightrope walk: appease domestic exporters while avoiding overreliance on China. Options include:

• Delaying the China deal until after the 2026 U.S. elections
• Seeking WTO arbitration (a slow but credible path)
• Counter-tariffs targeting U.S. swing states

"This is chess, not checkers," observes a former Canadian trade official.

Investor Takeaways

Short-term volatility is inevitable. Watch for: