Trump’s Threat of a 100% Tariff on Canadian Goods Is an Empty Threat, Economist Says

The U.S. president recently warned that Canada would face a 100% tariff on its exports if the country signs a trade deal with China. A senior economist at a major financial institution, Derek Holt, dismissed the warning as “not remotely credible” and called it an empty threat.

The comment came after Canadian Prime Minister Mark Carney delivered a well‑received speech at the World Economic Forum in Davos, calling for action against a shifting global order. In a separate address, the president referred to Carney as “Governor Carney” and criticized him as “ungrateful.”

Carney quickly responded on Sunday, stating that Canada is not pursuing a free‑trade agreement with China and that the Canada‑U.S.‑Mexico Agreement requires prior notice for any deals with non‑market economies. A U.S. Treasury official also downplayed the possibility of immediate new tariffs.

Holt argues that even if the president’s threat were acted upon, it would never be implemented. A 100% tariff would devastate U.S. businesses across multiple sectors, leading to massive layoffs and a freeze in supply chains for everything from oil and gas to manufactured goods.

He pointed out that an auto‑parts executive had warned that a much lower tariff last year could have caused millions of U.S. jobs to vanish. Expanding that logic to other industries, Holt says the economic fallout would be catastrophic.

Beyond domestic disruption, such a tariff would provoke large‑scale retaliation, putting pressure on federal and provincial governments, as well as consumers. Markets would likely lose confidence in the U.S. institutional framework, driving the dollar, Treasury yields, and equities down.

“If markets view the U.S. as a higher‑risk country, they’ll shift assets to a new equilibrium that reflects that risk,” Holt explained, noting the potential for widespread asset sell‑offs.

The threat could also weaken the president’s legal position in the Supreme Court case that challenges his use of emergency powers to impose tariffs. Even though the threat is not credible, it underscores the need for Canada to diversify its trade partners.

Canadian exports to the U.S. have already declined from about 85% of total exports 25 years ago to roughly 67% today, and analysts expect the trend to continue. The situation serves as a reminder of the volatility in trade relations and the importance of stable, diversified partnerships.