This combination of pictures created on January 24, 2026 shows, L/R, US President Donald Trump in Davos on January 22, 2026 and Canada’s Prime Minister Mark Carney in Davos on January 20, 2026.
The Trump administration has warned Canada that a trade war with the United States would have a “devastating” impact, as tensions between the two longtime allies continue to escalate.
US Transportation Secretary Sean Duffy said Canada would be “foolish” to believe it could win a trade war with President Donald Trump, arguing that Canada relies far more heavily on trade with the United States.
The warning came after trade negotiations between Washington and Ottawa broke down on Friday, triggering new 50 per cent US tariffs on about $20 billion worth of Canadian goods. The tariffs affect roughly 5.5 per cent of Canada’s exports to the United States.
Canada responded by announcing matching tariffs, including new levies targeting US steel and dairy products, which are scheduled to take effect on September 8.
Duffy said Canada would likely return to the negotiating table soon because of the potential economic consequences.
“We’re great trading partners,” Duffy said on Fox News Sunday, while arguing that Canada benefits more from the relationship than the United States does.
Canadian Prime Minister Mark Carney, however, remained defiant, saying Ottawa had rejected what he described as a “bad deal” and accusing Washington of attacking Canada.
“You’re at war when you get attacked. We got attacked,” Carney said.
He cited US demands that could limit Canada’s ability to negotiate trade agreements with other countries, as well as what he called unacceptable threats to the French language and Quebec culture.
Trump responded on Sunday by again suggesting that Canada should become a US state, while accusing Ottawa of imposing heavy tariffs on American farmers.
The latest dispute marks a sharp deterioration in relations since Trump returned to the White House in January 2025. His repeated threats to make Canada the 51st US state have further strained ties between the neighbouring countries.
Carney has said the relationship with the United States has been permanently altered and that Canada must reduce its economic dependence on Washington.
The escalating trade dispute has already affected Canada’s economy, with tariffs on automobiles, steel and aluminium contributing to job losses and increasing pressure on businesses.
US Trade Representative Jamieson Greer said Washington had offered Canada concessions on steel, aluminium, automobiles and lumber, which he described as giving Canada the most favourable treatment of any US trading partner.
Despite the latest escalation, however, no new trade talks between the two countries have been scheduled.
