(Bloomberg) -- After US President Donald Trump declined to impose tariffs on his first day back in power, officials in the Canadian government expressed caution, saying the fight against US protectionism is far from over.
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Trump has threatened 25% tariffs on all imports from Canada and Mexico. That would hammer Canada’s economy while also provoking trade retaliation from Ottawa meant to drive up prices on US consumers and industries.
Instead of coming out with tariffs on day one, Trump is ordering his officials to first examine US trade relationships for unfair practices and investigate whether China has complied with an earlier trade deal, according to a memo seen by Bloomberg News.
Trump is set to direct his cabinet secretaries to assess the impact of the US-Mexico-Canada Agreement on American workers and businesses and make recommendations on whether the US should continue participating in it, according to the document. Trump negotiated the USMCA in his first term as a replacement for the North American Free Trade Agreement; the new deal came into force in 2020.
The Canadian dollar jumped more than 1% — the biggest gain since May 2023 — while stocks and Canadian oil prices rallied. But officials in Prime Minister Justin Trudeau’s government remain wary the president may still eventually proceed with tariffs. Trump’s inauguration address did not mention Canada, though it did promise “to tariff and tax foreign countries to enrich our citizens.”
“We’re very cautious,” Foreign Minister Melanie Joly told reporters at a Quebec hotel where Trudeau’s cabinet has gathered for a two-day retreat. “It’s really, really important that we continue to roll up our sleeves and make sure that we defend Canadian interests.”
Kirsten Hillman, Canada’s ambassador to the US, told the Canadian Broadcasting Corp. she’s “cautiously optimistic” but added: “I’ll feel better when we see the details of what he’s asking for in terms of a study.”
Joly and Hillman both said the Canadian government had not been given advance notice about the trade study and learned about it through media reports.
When Trump threatened 25% tariffs in November, he connected it to the flow of migrants and fentanyl over US land borders. Canada’s plan to boost border security resources, such as helicopters and drones, received “very positive feedback” from Trump officials, Joly said.