Trump's Tariff Threats Designed to Influence Pending USMCA Talks, Canada PM Carney Says — 2nd Update

By Paul Vieira

OTTAWA--Canadian Prime Minister Mark Carney said President Trump's tariff threats likely represent some prepositioning ahead of negotiations later this year to renew the U.S.-Mexico-Canada trade pact.

Carney said Monday he expects a robust review of the continental trade pact, known as USMCA, which the Trump administration will lead later this year. Trade analysts expect Trump and his negotiators to push for more concessions from Canada to keep the deal intact.

Trade tension between the U.S.-Canada accelerated over the past week, with Trump and key administration officials criticizing Carney for striking a trade detente with China, America's biggest rival; and for delivering remarks at the World Economic Forum largely viewed as a rebuke of the White House's aggressive bid to use economic and military might for geopolitical goals.

Trump threatened on Saturday 100% tariffs on all Canadian imports should Ottawa and Beijing strike a free-trade pact. Carney said Canada and China moved to resolve a specific tariff row dealing with Chinese electric vehicles and Canadian agricultural and food products, and Ottawa has no intention of pursuing a broad free-trade pact with Beijing.

"I think some of these comments and positioning should be viewed in the broader context" of the pending USMCA review, Carney said at an event to unveil tax-relief measures. He added Canada and the U.S. have a "remarkable economic and security relationship, but that can be improved, and that is something that can be dealt with in negotiations."

Brian Clow, a senior aide to former Prime Minister Justin Trudeau, said he expects officials in Ottawa to try to de-escalate tensions with their U.S. counterparts in the next few weeks. "This government knows there are always ups and downs with Trump and they have the discipline to stay calm and focused," said Clow, who advised Trudeau on U.S.-Canada relations.

Eurasia Group, the geopolitical risk firm, said it expects the Trump administration to use Canada's decision to reduce tariffs on some China-made EVs as leverage to extract further concessions. The Canada-China agreement calls for China to send about 49,000 EVs to Canada at a tariff rate of about 6%, well below the 100% duty that Canada imposed in 2024 to align China policy with the U.S.

"If Washington treats the EV carve‑out as a precedent, expect harder lines from the U.S. on autos and batteries, a stricter views on subsidies, and broader tariffs floated as leverage," said Kevin Ford, a foreign-exchange and macro strategist at Convera, a cross-border payments and currency exchange firm.

Canada's economy is struggling under the weight of U.S. tariffs of up to 50% on sectors such as steel, aluminum, motor vehicles and forest products. Still, about 80% of Canadian exports to the U.S. are entering duty free because they comply with the terms in USMCA. The USMCA talks represent an elevated source of uncertainty, officials and economists say, leading to businesses curtailing investment and hiring plans, and increased worries among households about job security.

The Bank of Canada issues its first policy decision of 2026 on Wednesday, and is expected to keep its main interest rate unchanged at 2.25%. Economists, though, wonder whether the central bank will cast further doubt about growth given the trade environment.

Carney has made trade diversification a priority policy matter, to reduce dependence on a protectionist U.S. His speech last week in Davos, Switzerland, warned attendees that the Western-led, rules-based trading system is history, and that smaller powers like Canada need to work collectively to counter economic coercion from global hegemons. Carney didn't identify Trump in his remarks.

Carney told reporters Monday he has no regrets about his speech, even though Trump and other senior officials weren't impressed. Trump, in his Davos speech, said Canada "gets a lot of freebies from us," and that, "Canada lives because of the U.S."

"I described the current situation. You have to be honest," Carney said. "And that highlights the need to diversify our trading relationships."

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

January 26, 2026 13:57 ET (18:57 GMT)