Why Trump’s trade team thinks Canada is the problem

Ever wonder why every Canada-US trade discussion feels like we’re walking into a buzzsaw?

Well, here’s your answer. Trade Minister Dominic LeBlanc is heading to Washington this week to meet with Trump’s new trade czar, and word from inside the Beltway isn’t exactly encouraging. The quote making rounds among DC insiders? “They just hate Canada.”

That’s not hyperbole. That’s the awkward reality hanging over the USMCA talks that just restarted.

LeBlanc’s D.C. Mission

LeBlanc’s meeting Friday marks the first face-to-face sit-down since Trump’s team signaled they want major changes to the Canada-US-Mexico trade deal. The minister’s agenda is pretty straightforward: figure out what the Americans actually want and how much it’s gonna cost us.

The timing isn’t accidental.

The USMCA comes up for its six-year review on July 1, 2026, but preliminary discussions started three months early. That’s unusual. Typically, these reviews begin just 180 days before the deadline, not 15 months ahead. Which tells you everything about how serious they’re this time.

Trump’s trade team, led by Howard Lutnick as Commerce Secretary and Robert Lighthizer returning as US Trade Representative, has already compiled a 47-page list of grievances with the current agreement. Sources familiar with the document say it targets Canadian policies in 12 specific sectors, with dairy and energy topping the list. And when I say topping, I mean they’re mad.

“We’re going in with our eyes wide open,” one government source told reporters on Monday. Take that with a grain of salt. Nobody saw the last round of trade wars coming either, despite $32 billion in tariffs that got slapped on Canadian goods between 2018 and 2020.

The Canadian delegation includes Deputy Minister of International Trade Sara Wilshaw and Ambassador to the US Kirsten Hillman. They’ll be facing a US team that’s already scheduled follow-up meetings through March, suggesting this negotiation could drag on for months. Maybe longer if things go south.

Where This Bad Blood Started

The “hate Canada” sentiment didn’t emerge overnight. It’s been building since the original NAFTA renegotiation five years ago, when Trump first complained about getting “ripped off” by Canadian trade practices.

During Trump’s first term, Canada faced 25% steel tariffs and 10% aluminum tariffs that cost Canadian exporters approximately $2.8 billion in lost revenue. Those tariffs got lifted in May 2019, but the resentment lingered on both sides.

You don’t just forget losing that kind of money.

The Americans also haven’t forgotten about the retaliatory tariffs Canada imposed on $16.6 billion worth of US goods, targeting everything from Florida orange juice to Wisconsin cheese to Ohio washing machines. Those strategic strikes hit Republican congressional districts hard, and memories run long in Washington. Longer than we’d probably like.

But the real turning point came during the softwood lumber dispute of 2021-2023, when Canada successfully used Chapter 19 dispute panels to overturn $7.2 billion in US duties. American trade officials saw that as Canada gaming the system, while Ottawa viewed it as the agreement working exactly as designed. Talk about different perspectives on the same reality.

“Every time we think we’ve got a fair deal with Canada, they find some way to twist the rules in their favour. The Chapter 19 panels are exhibit A of why this agreement needs fixing,” said former US Trade Representative Katherine Tai during congressional testimony last fall.

Why They Can’t Stand Us

Here’s where it gets interesting. The sentiment isn’t just coming from Trump’s inner circle. It’s trickling down through Republican trade staff, congressional committees, and industry groups.

Why the hostility? Three big reasons.

First, Canada’s dairy supply management system. American trade negotiators have been trying to crack that nut for decades, and they’re still mad about the concessions we didn’t make last time. Under the current USMCA, American dairy farmers got access to just 3.59% of Canada’s dairy market, worth about $560 million annually. They wanted 10%, which would’ve been worth $1.6 billion. Big difference.

Second, our energy sector. The Americans want guaranteed access to Canadian oil and gas, but they also want us to fast-track pipeline approvals and cut environmental reviews. That’s a tough sell in Ottawa, especially after the Keystone XL cancellation cost TC Energy $15 billion in writedowns.

Third, and this is the big one: they think we’re freeloading on defence spending.

Big deal.

Trump’s team sees Canada hitting 2% of GDP on NATO commitments as a trade issue, not just a military one. Canada currently spends 1.33% of GDP on defence, or about $33.8 billion annually. Getting to 2% would mean adding another $17.2 billion to the defence budget. That’s real money we’re talking about.

The math gets ugly fast when you realize that every billion dollars Canada doesn’t spend on defence is a billion that could buy American weapons systems. Pentagon contractors have been lobbying hard for tougher trade language that links defence spending to market access.

And guess what? They’ve got Trump’s ear on this one.

What’s Really Up for Grabs

The official line from both sides is that this is just “preliminary discussions.” But sources familiar with the American position say they’re looking at some major changes (and that’s putting it mildly). Don’t let the diplomatic speak fool you.

Buy American provisions could get tighter, particularly for government procurement. That hits Canadian companies bidding on US infrastructure projects, a market worth about $4.2 billion annually to Canadian firms.

The Americans want to raise the threshold for Canadian companies from $7.5 million to $25 million on federal contracts. Doesn’t sound like much, but that change would lock out hundreds of smaller Canadian contractors.

Dispute resolution mechanisms might get weakened. Remember how Chapter 19 saved our bacon during the softwood lumber fights? The Americans want that gone, or at least want to stack the panels with more US-friendly arbitrators. They’re proposing that each country gets to reject up to three potential panelists, which would effectively give both sides veto power over decisions they don’t like.

And then there’s the big one: energy exports.

Trump’s team wants language guaranteeing Canadian energy supplies to the US market, even during domestic shortages. They’re looking at a clause similar to the old NAFTA proportionality requirement that got dropped in 2018. Under that system, if Canada normally exported 60% of its oil to the US, it couldn’t drop below that percentage during a supply crunch without American approval.

Look, that last point should scare anyone who remembers the energy crises of the 1970s.

What This Means Going Forward

The Americans are also targeting digital services taxes, which Canada implemented in 2022 on tech giants like Google and Facebook. The 3% tax generates about $800 million annually for Ottawa, but US negotiators want it classified as discriminatory against American companies. They’re threatening retaliatory tariffs worth up to $2.4 billion if the tax stays in place. Because of course they’re.

Crunching the Numbers

Here’s what’s at stake in dollars and cents. Canada-US trade hit $908 billion in 2024, up from $863 billion the previous year. That’s about $24,000 per Canadian in economic activity, making the US by far our largest trading partner. We literally can’t afford to mess this up.

But the trade balance isn’t even. Canada ran a $67 billion surplus with the US last year, mostly from energy and raw materials exports. Oil exports alone were worth $156 billion, while electricity sales added another $4.8 billion. That surplus is exactly what Trump’s team wants to shrink. They see it as money leaving American pockets.

Manufacturing jobs are another flashpoint (to put it lightly). The US lost about 180,000 manufacturing jobs to Canada between 2020 and 2024, by their calculations. Whether those numbers are accurate is debatable. Whether Trump’s team believes them isn’t.

The automotive sector shows how integrated the two economies have become.

Canada exported $48.2 billion worth of vehicles and parts to the US in 2024, while importing $32.8 billion worth. But those vehicles cross the border multiple times during production, with engines built in Windsor getting shipped to Detroit for assembly, then sent back to Canada for final manufacturing before heading to dealerships across North America. It’s a supply chain nightmare if you’re trying to untangle it.

“We’re not looking to punish Canada, but we need a deal that works better for American workers. The current agreement has created too many opportunities for jobs to move north,” said Robert Lighthizer during his confirmation hearing last month.

Translation: they absolutely are looking to punish Canada, at least economically. Don’t believe the diplomatic doublespeak.

What This Means Going Forward

Agriculture represents another pressure point. Canadian farmers exported $8.4 billion worth of products to the US in 2024, including $2.1 billion in canola, $1.8 billion in wheat, and $1.2 billion in beef. But American agricultural lobbyists argue that Canada’s supply management system creates an unfair advantage by keeping domestic food prices artificially high, allowing Canadian farmers to dump excess production into the US market at below-market prices.

It’s complicated economics, but the politics are simple: American farmers want more market share.

Your Wallet’s Gonna Feel This

If you’re wondering why this matters to your daily life, here’s the breakdown. Spoiler alert: it’s not gonna be pleasant.

Higher prices on everything from cars to food if tariffs go back up. The last round of trade disputes added about $800 per year to the average Canadian household budget, with groceries accounting for $340 of that increase. Fresh produce got hit particularly hard, with avocados up 23% and citrus fruits rising 18% during the peak of the trade war. Remember those grocery bills from 2019? They could look cheap compared to what’s coming.

Job losses in export-dependent industries. Forestry, agriculture, and manufacturing all took hits during the 2018-2020 trade wars. British Columbia lost 12,000 forestry jobs when lumber tariffs peaked at 20.83%. Ontario’s auto sector shed 8,400 positions when steel tariffs disrupted supply chains. Alberta’s energy sector actually gained 15,000 jobs during the same period, but that was mainly due to higher oil prices rather than trade policy.

Energy costs could actually go down short-term if we get locked into selling more oil and gas south.

Canadian crude currently trades at a $12-15 discount to West Texas Intermediate, partly because of pipeline constraints that limit our export options.

Guaranteeing more sales to the US could narrow that gap, putting more money in Alberta’s treasury but potentially raising gasoline prices in Ontario and Quebec. Win some, lose some.

And then there’s the loonie. Currency traders are already betting on a weaker Canadian dollar if trade tensions ramp up again. The dollar fell from 82 cents US to 74 cents during the last trade war, making imports more expensive but helping exporters compete. A similar drop this time would add about $200 annually to the cost of a typical family’s imported goods.

What This Means Going Forward

Housing markets in border cities could see impacts too. About 68,000 Canadians work in the US while living in Canada, earning an average of $78,000 annually. New restrictions on cross-border professional services, which the Americans are considering, could force those workers to relocate or find new jobs.

That’s a lot of people suddenly looking for work or moving south.

Who Gets Hit Hardest

The pain won’t be distributed equally across the country. Western provinces have more to lose from energy export restrictions, while Ontario and Quebec face bigger risks from manufacturing tariffs. Geography is destiny in trade wars.

Brutal.

Alberta exports 73% of its oil production to the US, worth about $89 billion annually. Energy companies like Suncor, Canadian Natural Resources, and Cenovus have already started lobbying Ottawa to accept American demands rather than risk losing market access. The province’s energy royalties, which fund about 22% of the government budget, depend heavily on maintaining those export volumes.

British Columbia’s forestry sector remains on edge after years of softwood lumber disputes.

The province exported $11.2 billion worth of forest products in 2024, with 67% heading to US markets.

Lumber producers are particularly worried about new anti-dumping investigations that could bring back the punitive tariffs that cost the industry billions in previous disputes. They’ve been here before, and it wasn’t fun.

Ontario’s auto sector employs 125,000 workers directly and supports another 375,000 jobs in supplier industries. The integrated nature of North American auto production means any new trade restrictions could force companies to reorganize their supply chains, potentially moving jobs to Mexico where labour costs are 60% lower than in Canada. Not exactly what you want to hear if you’re working on an assembly line in Windsor.

Quebec’s aerospace industry, centred around Bombardier and Bell Helicopter, exports about $8.9 billion worth of products annually. The Americans are eyeing government subsidies to the sector, claiming they create unfair competition for Boeing and other US manufacturers.

It’s the same old story: when American companies can’t compete, blame subsidies.

What Happens Next

LeBlanc’s got a tough job ahead of him.

He needs to figure out which demands are negotiable and which ones are deal-breakers. The Canadian government has already signaled it won’t accept energy proportionality clauses or major changes to supply management, but everything else appears to be on the table.

The smart money says Canada will give ground on agriculture and government procurement.

We’ve done it before. During the original USMCA negotiations, Canada agreed to eliminate Class 7 milk pricing and opened up 3.59% of the dairy market. This time, the Americans want another 2-3% of market access, which would be worth an additional $350-500 million annually to US farmers. It’s a lot of money, but it’s not existential for Canadian dairy farmers.

But energy exports and dispute resolution? Those could be the hills Ottawa chooses to die on. Prime Minister Justin Trudeau has repeatedly said Canada won’t accept any agreement that compromises energy sovereignty or weakens our ability to challenge unfair trade practices. Of course, politicians say a lot of things before negotiations get serious.

The bigger question is whether Trump’s team actually wants a deal or just wants to look tough on trade. Early signals suggest they’re more interested in the optics than the economics. Trump has already started holding rallies where he brags about getting “billions and billions” from Canada in the next trade agreement.

Worth noting: Congress has to approve any major USMCA changes, and the process isn’t simple.

The agreement includes a clause requiring six months’ notice before any country can withdraw, plus another six months for congressional review of proposed modifications. That timeline pushes any major changes into late 2025 at the earliest. Which gives everyone time to cool down, or time to get even madder.

What This Means Going Forward

And despite all the anti-Canada rhetoric, a lot of US border states depend heavily on Canadian trade. Michigan alone does $78 billion in annual trade with Canada, supporting an estimated 340,000 jobs. New York handles $43 billion, Washington state $41 billion. Those numbers give Ottawa some use, but probably not as much as we’d like.

The Mexican factor adds another wrinkle. Mexico’s new President Claudia Sheinbaum has made it clear she won’t accept any changes that hurt Mexican workers or limit the country’s energy sovereignty. That creates an opportunity for Canada to align with Mexico on key issues, but it also means the Americans could try to divide and conquer by offering Mexico better terms than Canada. Classic negotiating strategy.

Next week’s meeting won’t solve anything.

But it’ll tell us whether we’re heading for another trade war or just another round of diplomatic theater. LeBlanc’s team will be looking for signals about which American demands are serious and which ones are just negotiating positions. Reading the room has never been more important.

The timeline is tight. If negotiations drag past summer, they’ll run into the US midterm election cycle, where being tough on Canada becomes a campaign talking point. That makes the next few months critical for both countries. Politics and trade make for a toxic combination when you’re trying to get a deal done.

Either way, buckle up. The next year of Canada-US relations promises to be bumpy.