Canada faces growing economic risk as U.S. trade policy turns more punitive over Ottawa’s ties with Beijing.

On Jan. 24, 2026, U.S. President Donald Trump warned the United States could impose tariffs of up to 100 per cent on Canadian goods if Canada moves ahead with a trade deal with China. The threat points to rising tension and immediate risk for Canada’s export-driven economy.

Canada depends heavily on the U.S. market. In 2023, about 78 per cent of Canadian merchandise exports went to the United States, with most remaining exports also tied to North American supply chains. Much of this trade is governed by the Canada-United States-Mexico Agreement (CUSMA), which provides tariff-free access for qualifying goods and supports millions of jobs.

The prospect of new tariffs, combined with a scheduled CUSMA review in 2026, adds uncertainty. Any weakening of the agreement could leave Canadian exports facing new duties, reducing competitiveness and disrupting long-established supply chains.

Manufacturing, energy and agriculture would be among the most exposed sectors, as their production is closely aligned with U.S. demand and relies on stable, duty-free access. While Canada continues to seek new markets, few can match the scale of the United States.

The dispute has also taken on a political edge, with critics arguing Ottawa’s approach risks escalating tensions and increasing public anxiety rather than calming relations.

With tariff threats rising and CUSMA under review, Canada’s economic outlook will largely depend on stabilizing relations with its largest trading partner at a time when access to the U.S. market remains critical.