Canada Faces Trade War With No Leader

After President-elect Donald Trump's election victory, Canadian officials began racing to rebuild "Team Canada" the bipartisan group of federal, provincial and business officials led by Prime Minister Justin Trudeau who pushed back against Trump's tariffs in 2018.

Today, Team Canada has a problem: It is leaderless.

Trudeau's resignation, and decision to forestall elections for at least a few months until his party picks a new leader, leaves Canada with no recognizable plan to counter Trump's threats of 25% tariffs on all goods or his floating an American takeover of its northern neighbor by "economic force." The united front Canada presented Trump in his first term is fractured and distracted.

"We don't know who speaks for Canada today," said Goldy Hyder, president of the Business Council of Canada, a group that represents the chief executives of large Canadian companies.

Even before Trudeau's announcement on Monday, the longtime prime minister faced criticism that he wasn't adequately prepared for a trade fight with Trump. His closest political ally, Chrystia Freeland, resigned as deputy prime minister and finance chief over those concerns.

But even a weakened and unpopular Trudeau at least presented a battle-tested foil for Trump. Now, political analysts say, Trump has an opening to go even harder on Canada on trade and other matters, such as military spending.

"It's not ideal," said David MacNaughton, the former Canadian ambassador to the U.S. who helped renegotiate the North American Free Trade Agreement during Trump's first term. "Trump is somebody who, when he spots weakness, tries to press his advantage. It's going to be a zoo for the next two or three months."

On Tuesday, Trump drove home the stakes during a news conference, where he called on Canada to become the 51st state.

Trudeau responded to Trump with a post on the social-media platform X: "There isn't a snowball's chance in hell that Canada would become part of the United States.

On Monday, Trudeau said he would stay on until his Liberal Party names his successor, likely by the end of March. One senior Canadian government official said the departing prime minister would use his authority to impose countertariffs on the U.S. if Trump slaps duties on Canadian imports, a prospect that looks increasingly likely.

But with Trudeau a lame duck whose approval polls at 22% and who was forced out by his own party, his words and actions carry less weight at home and abroad. Any new Liberal Party leader would likely face a no-confidence vote almost immediately, triggering new elections this spring.

The leader of Canada's right-leaning Conservative Party, Pierre Poilievre, also posted on X on Tuesday and said, "Canada will never be the 51st state. Period."

Canadian officials mobilized quickly when Trump imposed duties on Canadian and Mexican steel and aluminum in 2018 and forced the renegotiation of Nafta. During those talks, the "Team Canada" approach involved Canadian ministers, provincial leaders and business heads courting lawmakers in U.S. states and in Washington to remind them of how tightly integrated the Canadian economy is with the U.S.'s.

Canada is the U.S.'s second largest trading partner after Mexico, according to U.S. Census Bureau data. The countries traded roughly $700 billion of goods back and forth between January and November 2024. Carmakers, especially, have intertwined American, Canadian and Mexican supply chains that would be disrupted by new tariffs.

"If the Americans do something like that, the first place to feel the pain would be America," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association, a Canadian trade group. The U.S. auto industry doesn't have the capacity to quickly replace Canadian production, and tariffs on parts would raise the cost of cars for U.S. buyers, he said.

At his news conference, Trump said the U.S. could make do if it lost access to Canadian supplies, even its oil, gas and lumber.

The U.S. had a $54 billion trade deficit with Canada between January and November 2024, and Trump has said he wants to eliminate that difference. He also has demanded that Canada tighten its border and boost military spending.

It might be bravado and bluster on Trump's part, but even the prospect of losing tariff-free access to the American market has Canadian business leaders worried.

MacNaughton said the lack of leadership in Canada will make the first several months of the Trump term difficult for Canadian negotiators, but his comments on Tuesday might ironically serve to bring Canadians together.

"Nothing will unite Canadians more in the short term than having an American try to push them around," he said.