Justin Tang/The Canadian Press via AP
Ontario Premier Doug Ford wearing his “Canada Is Not for Sale” hat, January 15, 2025
Three years ago, Michigan Gov. Gretchen Whitmer and Ontario Premier Doug Ford signed an agreement designed to build on their long-standing economic ties. The memorandum of understanding was basically a goodwill gesture. Michigan and Ontario have the deepest trading ties between any state and province, thanks to the strength of their automotive industries and sectors ranging from energy to tourism.
But since President Trump returned to the White House, spewing the fiction that the United States is somehow “subsidizing” Canada, both Whitmer, a Democrat, and Ford, the leader of Ontario’s Progressive Conservative Party, have warned that greenlighting tariffs increases the likelihood of a tit-for-tat trade war that would crater two regions and two national economies.
Outlines of Trump’s plans are beginning to emerge. Under questioning by Sen. Gary Peters (D-MI) during his Wednesday confirmation hearing, Trump’s commerce secretary nominee, the billionaire Wall Street CEO Howard Lutnick, disclosed the administration’s possible two-step tariff plan. According to a CBC report, the first phase—which, by the way, could be avoided if the Canadians come up with options that satisfy the president before a February 1 deadline—would address the administration’s concerns about Canada’s response to fentanyl trafficking.
Trump’s oft-stated grievances revolve around forcing Canada to beef up northern border security, even though fentanyl trafficking and migrant crossings are minuscule compared to the border with Mexico. A second, broader set of tariffs would be levied in the spring. It’s also possible that the administration’s threats are tools designed to leverage an earlier review of the United States-Mexico-Canada Agreement (USMCA), currently scheduled for 2026.
Whatever his motivation and ultimate designs, clearly Trump expects allies and enemies alike to genuflect. From the minute Ford modeled a “Canada Is Not for Sale” baseball cap after a meeting of Canada’s provincial leaders and Prime Minister Justin Trudeau, it was clear that he intended to step into the cavernous Canadian leadership vacuum left by the outgoing prime minister’s political demise and take on the role of head coach of Team Canada, at least until a federal election is called and a new leader takes over. The premier himself has called a snap election in Ontario, launching his re-election campaign in the shadow of the Ambassador Bridge that connects Detroit and Windsor, Ontario, and training his remarks almost exclusively on trade and Trump.
Colombia quickly capitulated to Trump’s demands to accept migrant deportation flights or face steeply escalating tariffs, but the stronger, reciprocal nature of the U.S. trade relationship puts Canada on a different footing. With Trudeau’s standing diminished, Ford has emerged as the one Canadian leader willing to get out in front of some trade deal that doesn’t degrade Michigan and Ontario’s cross-border dynamism and keeps Team Canada together—at least until the next prime minister picks up the reins.
Together, Michigan and Ontario produce nearly one-quarter of the North American continent’s automotive output.
The trillion-dollar U.S.-Canada auto industry faces the greatest risk for disruption in a hastily imposed tariff regime. Nearly a quarter of those transactions move between Detroit and Windsor, the center of the Canadian auto industry; tens of thousands of people work in the sector. Together, Michigan and Ontario produce nearly one-quarter of the North American continent’s automotive output.
Vehicles are the second-largest Canadian export (behind energy), and the vast majority go to the United States. Canadian-made auto parts are exported primarily to Michigan. Then there are the intricate supply chain dynamics; parts flow seamlessly across the border multiple times before new cars show up at dealerships.
Though there’s nothing on the table yet, Jason Miller, a Michigan State University professor of supply chain management, points to the anxiety seeping into some sectors. There is “a little bit of hedging going on in bringing in some inventories,” he says. “If you need something in mid-February, it’s a ‘Let’s get it across a little bit early’ type of situation.” Miller points to stocking up by inventory-driven businesses that deal in building materials and among furniture wholesalers.
“We’re not seeing anything like the buildup of inventory accumulations of 2022, when there were so much supply chain disruptions taking place with so many materials shortages and concerns about long ocean lead times.” As for threats to the auto sector, Miller serves up one hypothetical: “If an across-the-board tariff gets implemented, decision-makers would have to calculate added costs and those impacts on vehicle sales.” Dealers that can’t handle the higher costs would pass them on to consumers.
As for the tools that Canada might use to respond to the imposition of the 25 percent tariff Trump has promised, the Ontario premier has ominously suggested that he’s open to curbing electricity supplies to border states. Ontario provides electricity to homes in Michigan, Minnesota, and New York. That stance separates Ford from some of the other premiers. François Legault, the Quebec premier, has said that he would not resort to dimming all the lights in New York and New England, regions that depend on Quebec hydroelectric power.
The U.S. is far and away the prime customer for Canada’s crude oil and gas exports, and Ottawa could levy new export taxes or restrict those flows as well. That move would hit Midwestern oil refineries hard since they rely heavily on Canadian crude. Michigan and other Midwestern consumers would come in for a world of hurt if Canada went that route and sent the price of home heating oil and gas soaring in the middle of winter. (The timing of a second set of tariffs to take place in the spring could serve to blunt the effects of possible retaliatory energy disruptions by Canada during the heating season.)
Alberta Premier Danielle Smith, who’s met with Trump in Mar-a-Lago and has been criticized for her “Alberta First” stance, has said that “under no circumstances” would she consider cutting off oil and gas exports to the U.S. “I think Eastern Canada has to be very, very careful what they wish for,” she has said. “They get almost all of their energy from the United States.” (Oil processing requirements and other factors drive the type of oil a refinery uses; Eastern Canada relies on oil imported from the U.S. and other sources.) Ultimately, the decision lies with Ottawa, but oil taxes are a sensitive issue in Alberta. Prime Minister Pierre Trudeau, the father of the current prime minister, levied taxes on Alberta oil in the 1970s. Memories of the economic slide that followed still scar the province.
But with Ottawa considering everything from export taxes to restricting energy shipments, Team Canada is split—a far cry from the united front that provincial leaders were able to maintain during the first Trump administration. The northern border states and the provinces also made more of an effort to coordinate with an inattentive Trump in the White House. This time around, with Trump’s aggressive stances, the provinces may not be strong enough to stand up to Washington.
“Worried and tense” is how Randy Besco, a University of Toronto political scientist, describes the mood among Canadian provincial leaders. “It was different last time, they weren’t being asked to bear these kinds of costs,” he says. “We weren’t talking about a massive economic disruption. If 25 percent tariffs come on, there’s going to be an immediate recession the next day. If Canada bans oil to the U.S., Alberta goes into deficit immediately.”
Can the Whitmer-Ford partnership survive Trump? One piece of Ford’s electoral strategy is that running for re-election now gets him out in front of a possible confrontation with the U.S. instead of politicking in the middle of one if he waited to call an election. “This is a going to be a battle for the next four years, and I want to make sure I have a strong mandate to outlast President Trump,” he said on Tuesday. Like the national party, the Ontario Progressive Conservatives are leading in the polls.
For her part, at the Detroit Auto Show in mid-January, Whitmer name-checked the Ontario premier and re-emphasized the long-standing ties between the province and Michigan. While she didn’t oppose tariffs outright, she warned that they shouldn’t be used to punish a close ally “with a one-size-fits-all solution” that compromises supply chains, production lines, and jobs in both Ontario and Michigan. She put her audience on notice that if the president goes ahead with tariffs, “you’ll pay more to buy a Silverado, fix the engine of your Mustang, or replace the fender on your Jeep Grand Cherokee.”
