Trade War Erupts: Trump Threatens 100% Tariffs on Canada Amid China Deal Fury!

NORTH AMERICAN ECONOMY ROCKED! In a stunning move, President Donald Trump has unleashed a fiery warning: Canada faces a crippling 100% tariff on ALL its goods entering the United States. This aggressive threat comes after reports surfaced of Canada pursuing closer trade ties with China. The White House has made its stance unequivocally clear: no new deals with Beijing without severe consequences. This is a bombshell for North American trade.

Trump's Tariff Tsunami Threatens Ottawa

The alarming declaration came via Trump's social media, specifically Truth Social. He explicitly stated, "If Canada makes a deal with China, it will immediately be hit with a 100% Tariff against all Canadian goods and products coming into the U.S.A." He further warned that Prime Minister Mark Carney would be "sorely mistaken" if Canada became a "drop off port" for Chinese products targeting the American market.

This isn't just rhetoric. The threat follows a recent shift in Canadian policy. Earlier this month, Canada adjusted its 100% tariff on Chinese-made electric vehicles, lowering it to about 6.1% for an annual allotment of 49,000 vehicles. In return, China is expected to lower retaliatory tariffs on Canadian agricultural products like canola and lobster. This move by Ottawa, aimed at stabilizing trade, has clearly ignited the US President's fury.

Canada Pushes Back: "No Free Trade Deal with China"

Canadian Prime Minister Mark Carney swiftly responded to Trump's direct challenge. Carney stated unequivocally that Canada has "no intention" of pursuing a free trade agreement with China or any other "non-market economy." He emphasized Canada's commitments under the CUSMA trade pact (USMCA in the US), which requires prior notification for such agreements.

Carney clarified that recent engagements with Beijing were specifically to resolve "issues that developed in the last couple of years." This refers to the tit-for-tat trade measures from 2024. At that time, Canada mirrored US policy with a 100% tariff on Chinese EVs and 25% on steel and aluminum. Beijing retaliated with stiff duties on Canadian exports, including canola oil, pork, and seafood. The current Canadian adjustment was presented as a move to address these specific retaliatory tariffs.

American Consumers and Businesses Already Feeling the Pinch

The impact of tariffs is already hitting American businesses and consumers. Major bellwethers like Procter & Gamble and spice maker McCormick & Co. are reporting significant hits to profit margins. Procter & Gamble, for instance, has raised some US prices by 2% to 2.5% to offset tariff costs and weak sales. McCormick's gross profit margins were down about 130 basis points from the year prior.

Economists are sounding serious warnings. Goldman Sachs projects that tariff-driven inflation will increase by an additional 0.3 percentage points in the first six months of 2026. By the end of 2026, consumers are expected to bear 80% of the tariff costs. This directly translates to higher prices for everyday goods.

• Tariff costs currently make imported goods about 5.8 percentage points more expensive.

• Domestic goods cost about 4.3 percentage points more than expected pre-tariff.

• Job growth has collapsed in the US, with sentiment-driven hiring freezes across industries.

Bruce Casman, chief global economist at JP Morgan, highlighted that the "key transmission element of tariff policy is through sentiment." Businesses are hesitant to invest and hire due to uncertainty, impacting job growth.

Experts Warn of Self-Inflicted Economic Harm

International trade experts are united: Trump's tariff threats would harm the US economy just as much, if not more, than Canada's. Preetika Joshi, an assistant professor at McGill University, stated, "Yes, he's hurting Canadian businesses, of course, but he's hurting U.S. consumers more. He has to know this."

The trade between the two nations is immense, with over $909 billion in goods and services exchanged annually. Approximately 85% of Canadian goods typically ship to the US tariff-free under existing agreements. A 100% tariff would dismantle decades of integrated supply chains and consumer access.

This scenario creates "external headwinds" for the North American economy. The review of the free trade accord between the US and Canada in 2026 adds another layer of uncertainty.

What's Next

The coming days will be critical. Will President Trump escalate his threats, or will his rhetoric soften as it has in the past? The Canadian government remains firm on its CUSMA commitments, seeking to de-escalate the situation while defending its limited trade adjustments with China.

Businesses across North America are watching nervously. Consumers face the prospect of further price hikes on everything from groceries to cars. The trade standoff between these close allies could redefine economic relationships for years to come. The world waits to see if a full-blown trade war will erupt, creating widespread economic turmoil.