Hollywood North is back with a vengeance. This week, Canada produced its own version of “Shock and Awe,” with a three-minute video montage sent to President Trump in a last-ditch attempt to theatrically make the case of the successful deployment of the Canadian government’s enhanced border security program. Whether this proves sufficient to mitigate the scope of the President’s tariffs threats remains a cliffhanger to the audience.
This weekly update gives some details of the video and other federal government efforts to convince the Americans not to start a trade war, while tracking the American administration’s statements on Canada, as well as providing updates from Premiers, business leaders, the federal opposition leaders, and Liberal leadership candidates.
Alex Steinhouse of the Firm’s GR & PL group provides additional context below.
President Trump’s Threats to Impose Tariffs on Canadian Goods
The threats of tariffs on Canadian goods continued to pile on this week, following President Trump’s startling virtual remarks at the World Economic Forum in Davos last week, in which he not only continued to threaten 25% tariffs, but even dismissed any American need for Canadian oil, gas, autos or lumber.
At his confirmation hearing on Wednesday, Trump's pick to lead the US Department of Commerce and to oversee the President’s tariff agenda, Howard Lutnick, told the Senate of a two-step approach to tariffs.
Phase one is emergency action to deal with the fentanyl crisis, in which he sees the tariffs as a way to get Canada to take action on border security: "If we are your biggest trading partner, show us the respect. Shut your border and end fentanyl coming into this country," Mr. Lutnick said. He also expressed concern with respect to the perceived failure of Canadian law-enforcement to combat money-laundering by international criminal activities in Canada.
On a positive note, however, Mr. Lutnick, went on to say that Canada and Mexico are "acting swiftly" on border security "and if they execute it there will be no tariff, and if they don't then there will be."
As for phase two of the tariff plan, Mr. Lutnick made clear that the US is looking at a broad range of tariff options, which will be informed by a study the President has demanded from his officials by April 1, and there are “scores to settle” with Canada, specifically calling out restrictions on US dairy exports to Canada and auto manufacturing: "Canada ... treats our dairy farmers horribly. That's got to end;" “The car manufacturing went to Canada; it went to Mexico. It's important that that come back to Michigan, come back to Ohio."
Mr. Lutnick also underscored that he prefers broad tariffs on entire countries to punish “unfair trade practices,” rather than narrow tariffs against specific products: "I prefer across-the-board," he said, expressing concern about sector-by-sector battles. "When you pick one product in Mexico [for example], they'll pick one product. You know, we pick avocados. They pick white corn. We pick tomatoes. They pick yellow corn. ... My way of thinking — and I've discussed this with the President — is country by country. Macro. Let America make it more fair."
On the other side of the internal Trump administration debate, Treasury Secretary Scott Bessent is said to be pushing for new universal tariffs on US imports to start at 2.5 percent and rise gradually month to month, allowing businesses time to adjust and countries to negotiate with the Americans.
No need to check the calendar – February 1st is tomorrow.
On Thursday, President Trump said that he will impose 25 percent tariffs on Canada and Mexico beginning then, reiterating concerns about illegal migration, fentanyl and trade deficits: “I'll be putting the tariff of 25 percent on Canada, and separately, 25 percent on Mexico, and we'll really have to do that.” In follow up to a question of whether tariffs would also be imposed on Canadian oil exports to the US, Mr. Trump said "we may or may not" apply the duties. As a reminder, in 2023, 60 per cent of the crude oil imported to the United States came from Canada, more than the rest of the world combined.
Then again, the Wall Street Journal is also reporting that Trump administration officials continue to propose “off ramps” to the President to avoid imposing the tariffs on Saturday.
On Friday, Reuters reported that the President is expected to announce new tariffs against Canada and Mexico that will begin on March 1, but will include a process for the countries to seek specific exemptions for certain imports. It would also allow Canada to continue to negotiate over February as well as convince the Trump administration not to proceed with 25% tariffs.
However, President Trump’s spokesperson then denied this, saying tariffs are still scheduled to be announced on February 1st- 25% on Canada and Mexico, 10% on China.
President Trump is riding the success of his tariff threats on Colombia (and not Columbia (University), as his press statement erroneously said), with the Latin American country backing down and accepting “all of President Trump’s terms”, including the “unrestricted acceptance” of immigrants who entered the US illegally, after American military planes carrying departees had been previously blocked from entering the country.
While the stakes are multitudes bigger with respect to Canada and Mexico compared to Colombia, and rational economic heads may still prevail in advance of Saturday, it is clear that the President continues to enjoy doubling down for the long run on what he sees as the virtue of imposing tariffs: "Tariffs, I told you, most beautiful word in the dictionary," President Trump said Monday as he recalled his campaign speeches praising the import taxes. He reminisced in that speech how he was criticized for praising the term, prompting him to conclude that tariff is, in fact, the fourth most beautiful word after "God, love, religion."
The Government of Canada’s Response
The Prime Minister and his Ministers continued to speak and meet this week with their counterparts in Washington to try to delay, mitigate or entirely avoid the February 1st and April 1st tariffs threats.
On Monday, at the 80th anniversary of the liberation of the Auschwitz concentration camp, the Prime Minister was reported to have spoken at length with Mr. Lutnick in Poland, making the case of Canadian efforts to secure the border and against American tariffs.
In preparation for the Americans’ decision, the Prime Minister and his cabinet are also rumoured to be planning a multibillion-dollar, pandemic-style bailout for workers and businesses. Measures being considered include waiving the one-week waiting period for employment insurance benefits, which would not require Parliamentary approval.
However, the bulk of potential spending on new programs to help laid-off workers and businesses affected by tariffs would require Parliamentary approval, which could not take place until Parliament resumes sitting once prorogation ends on March 24th. Should this package be moved forward, it would require one of the opposition parties to support it. No discussions with the opposition have allegedly taken place to date.
The Prime Minister and Finance and Intergovernmental Affairs Minister Dominic Leblan also virtually convened the First Ministers on the Canada-US relationship. They discussed continuing to work together to lift internal trade barriers (which the Minister of Transport and Internal Trade Anita Anand is leading on for the federal side, with the Committee on Internal Trade meeting Friday to that end), along with committing to a “strong response” if tariffs are imposed, and continuing outreach efforts with Americans. They agreed to reconvene in the days to come. The Prime Minister has also convened his Council of Canada-US Relations in Toronto on Friday.
Meanwhile, Ministers have been reaching out to various American counterparts and have heard little that left them reassured. They have been repeatedly told that President Trump personally needs to be convinced by direct evidence of the security measures Canada has taken.
To that end, as first proposed by Prime Minister Trudeau and Minister Leblanc during their dinner at Mar a Lago, Canada has been preparing video footage to show President Trump to illustrate recent and newly implemented efforts at securing the border, rather than just stating commitments to new measures.
According to sources, while much footage has already been shared with American officials, Minister Leblanc has now shared a specific three-minute video clip with Mr. Lutnick directly to make the case. Mr. Leblanc will then travel to Washington to meet Mr. Lutnick, once he is confirmed by the Senate.
The video is said to start out by highlighting the substantive statistical drop in the number of illegal crossings at the northern border. Compared to 3,399 people detained by American authorities last May after illegally crossing from Canada, by December, that number is said to have decreased to 510. That amounts to an 85 percent reduction in southbound illegal crossings in the latter half of 2024.
The video goes on to show the results already achieved in deep woods and waterways in terms of adding hidden cameras and surveillance teams, along with the operation of sixty new drones and the two newly leased Blackhawk helicopters on the American border with Manitoba and Alberta.
On Wednesday, Foreign Affairs Minister Mélanie Joly was in Washington for a fifth time since the American election, to meet with her counterpart, US Secretary of State Marco Rubio as well as with Kevin Cramer, North Dakota Senator and co-chair of the American-Canadian Economy and Security Caucus.
At her subsequent news conference, Minister Joly told reporters that she believes Canada's border plan is resonating with the Americans: "At the RCMP level, at the CBSA level, we're making the contacts to clearly show what we're doing. The Secretary of State understands the relationship between trade and geopolitics. It is important that we work together and that we not be divided in a world where there's so much geopolitical competition, particularly when it comes to China."
In a readout published on Wednesday evening, Secretary of State Rubio confirmed that they discussed “secure borders and energy security”, and "commended Canada for confronting the [Chinese Communist Party] CCP's coercive and unfair economic practices. The Secretary and Minister Joly also reaffirmed co-operation to enhance safety and prosperity for both countries."
Meanwhile, Minister Joly has also separately been contacting international allies, including Mexico, Britain and EU member countries, to create a unified response to the universal tariffs threats the President has been threatening to them all: “At the heart of my conversations with my British colleagues and my European colleagues is going to be the question of how to respond to tariffs. We have to be extremely pragmatic when it comes to working with the Europeans and also with the U.K. on this. President Trump has referred to using tariffs against the world.”
Public Safety Minister David McGuinty has been in Washington too, to update Americans on Canadian efforts to better secure the border, and to remind them that the US’ northern border cannot compare to its southern border. On fentanyl, Minister McGuinty reiterated the point that less than 1% of fentanyl in the United States comes from Canada. He also announced that negotiations with the Americans are underway for a joint North American task force on fentanyl targeting organized crime, including cartels.
The CBSA and the RCMP also announced Wednesday that its Project Disrupt and Deter, a new border intelligence initiative launched last month to curb irregular migration, recently intercepted a human smuggling attempt in Fort Erie, Ont., along the border.
On a different note, Minister Bill Blair announced that he is working towards hitting the NATO goal of 2% of GDP on annual military spending in 2027 and that it is “absolutely achievable,” rather than the previously announced 2032 date. This is in response to President Trump now asking NATO members to increase annual military spending to 5 percent of GDP.
Finally, the federal civil service has now hosted three weekly briefings, with readouts available, with industry and labour stakeholders, along with provincial and territorial representatives, on the Canada-US economic relationship. The briefings have been led by the Deputy Minister of Finance Chris Forbes with an invite list containing 273 names.
What are Canada’s Premiers Saying?
With the election call at Queen’s Park this week, Ontario Premier Doug Ford is on the campaign trail. However, he assures Ontarians that he remains on duty as Premier throughout to defend against any American actions: "I'll still be Premier every single day," Mr. Ford said last Friday. "I'll be talking to our Ministers. We'll be getting policies out there."
This also includes Premier Ford participating in two planned visits to Washington during the election campaign with his fellow Premiers to meet with American officials and push back on the threats to the Canadian economy. Premier Ford says that the Progressive Conservative Party will pay for the trips and not the Ontario government.
Ontario Opposition leaders have decried this approach, arguing that it breaches the “Caretaker Convention,” which sets out that, to the extent possible, government activity following an election call – in matters of policy, expenditure and appointments – should be restricted to matters that are: routine, or non-controversial, or urgent and in the public interest, or reversible by a new government without undue cost or disruption, or agreed to by opposition parties (in those cases where consultation is appropriate).
Meanwhile, in Alberta, Premier Danielle Smith met with federal Energy and Natural Resources Minister Jonathan Wilkinson, who was seeking to align respective governmental views on the ambit of countervailing tariff measures. Minister Wilkinson brought a message that the federal government’s response would not single out Alberta.
Premier Smith has also called on the federal government to appoint a counterpart “Border Czar” to Tom Homan in Ottawa, to work on reducing fentanyl smuggling and illegal border crossings. The federal government is weighing whether to proceed with this appointment, and considering Canada’s former Chief of the Defence Staff Wayne Eyre for the role. The Premier has also invited Fox News to the Coutts, Alberta border crossing to demonstrate efforts at better securing the border.
On Thursday, Premier Smith additionally proposed that Canada establish a joint NORAD military base in the Canadian north, similar to the one headquartered in Winnipeg.
Meanwhile, Manitoba Premier Wab Kinew has highlighted new measures his province has taken, including deploying Manitoba Conservation Officers to join RCMP patrols at the border.
What are Business Leaders Saying?
A new KPMG survey shows that almost half of Canadian businesses plan to shift more investments and operations to the US to mitigate potential tariffs and maintain market access. And nearly two-thirds of Canadian businesses reported making more shipments to the US ahead of January 20th.
Moreover, 90 percent of respondents said they “wholeheartedly believe” that the federal and provincial governments “must stand firm in protecting Canada’s sovereignty and values,” even if it hurts their business, while 80 percent support targeted, dollar-for-dollar retaliatory response.
Meanwhile, the aluminum industry is warning Québecers that recent efforts to export “green” aluminum to the United Sates seem futile in the face of the Trump administration’s commitment to environmental deregulation and renewed oil and gas development. Ninety-three percent of Canadian aluminum exports go to the United States, but the industry suggests that perhaps Europe eventually could become a new market for this low-carbon offering.
Large scale industrial clients of Hydro-Québec have also advocated this week to the Quebec government to drop its plans to make them pay more for electricity (planned rate hikes to the tune of 60 percent over the next decade). It is argued that doing so will enable them to better mitigate the expected hit they will take from tariffs as well as not incent companies to move to the United States to get better energy rates.
In response, Hydro-Québec President Michael Sabia has pointed out that while the proposed approach is justifiable in his eyes (Quebec hydroelectricity rate hikes remain below projected American energy rate hikes), Quebec must be willing to adapt on a sectoral and sub-regional basis in the face of the geopolitical instability on the horizon.
Canadian Federal Opposition Parties
In what is becoming a weekly tradition, NDP Leader Jagmeet Singh continues to blow hot and cold on whether the NDP intends to defeat the government as soon as Parliament returns. Earlier this week, Mr. Singh called on Parliament to return immediately and expressed a willingness to work with the federal government on passing a package of support measures for those that would be affected by tariffs, as well as measures that address the Foreign Interference Inquiry’s proposed policy reform recommendations. But on Thursday, Mr. Singh said that he while he wants the House of Commons to return immediately to pass these financial and legislative measures, the NDP will nonetheless still vote to take down the government two months later, at the end of March, and that there will definitely be an election this spring.
The Conservatives have also called on the Prime Minister to reconvene Parliament as Canada faces the tariffs threats. They have not yet said whether they would support any new financial measures to support those affected by tariffs.
Liberal Leadership Race
Chrystia Freeland released her “plan to stand up to Trump” on Monday, which pledges a dollar-for-dollar counterpunch to any tariffs imposed by President Trump, and which should be chosen from a $200-billion consultative list. On Friday, she advocated for 100% tariffs on American wine, beer and spirits, as well as Teslas. She also says Ottawa should direct all federal agencies to stop immediately the purchase of all US goods (with exceptions made for national security) if the tariffs come into effect and encourage the provinces to do the same. Ottawa should also ban US companies from bidding on Canadian government contracts (excluding defence) and prioritize Canadian companies or industry in federal procurement.
Freeland also wants to immediately convene an international summit and form an international coalition to coordinate a joint response to challenges to our sovereignty and our economies, alongside the leaders of Mexico, Denmark, Panama, and the President of the European Union.
Meanwhile, Mark Carney, while campaigning in rural Québec over the weekend, said in an interview that he agreed with Québec Premier Legault that Canada should retain the option of cutting off Québec’s hydro exports to the US if it needs to retaliate against Trump’s tariffs. Carney has previously said in an interview he supports dollar-for-dollar retaliatory tariffs by and that they should be aimed where their impacts in the United States will be felt the hardest.
Finally, Karina Gould pledges to temporarily lower the GST to 4% for one year, as well as eliminate it on certain goods, to help Canadians with the affordability of everyday goods and blunt economic pain caused by any tariffs imposed by the Trump administration. In addition, Gould wants to permanently increase the corporate tax rate — from 15 per cent to 17 per cent — on companies that make more than $500 million per year in profits.
Currently, Carney has been endorsed by 62 Liberal caucus members, including two dozen current Ministers, while Freeland has the support of 26, and Gould has obtained two caucus endorsements.
Former MPs Frank Baylis and Ruby Dhalla also are participating in the race. Current MP Jaime Battiste dropped out Thursday and endorsed Carney. The race is to conclude on March 9th, with at least two debates (one in English, one in French) planned by the Liberal Party sometime after February 17. The Liberal Party has preliminarily announced that nearly 400 thousand members have signed up to be able to vote in the leadership race, pending Party review of the memberships.
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