• Ontario Premier Doug Ford warned of cutting energy supplies to the U.S. if Trump imposes tariffs on Canadian goods, emphasizing the economic risks and Canada’s readiness for retaliatory measures.
  • A potential U.S.-Canada tariff war could raise gas prices by up to 70 cents per gallon and disrupt industries like Michigan’s auto sector, which heavily relies on cross-border trade.
  • Analysts predict severe economic fallout for both countries, with Canada facing a possible recession, rising inflation, and job losses, while the U.S. risks higher energy costs and supply chain disruptions.

Ontario’s Premier Doug Ford took a firm stance, warning that his province would not hesitate to sever energy supplies to the United States if President-elect Donald Trump proceeds with his plan to levy tariffs on Canadian goods.

Mounting Strain Between Canada and the U.S.

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This declaration underscores the growing tension between Canada and the U.S. amid looming trade disputes. “Depending on how far this goes, we are prepared to go all the way, cutting off their energy supply to Michigan, New York State, and Wisconsin,” Ford announced in a press conference. He had just come from a virtual discussion with Prime Minister Justin Trudeau and other provincial leaders about Trump’s tariff threats. “While I hope it doesn’t come to this, my primary duty is safeguarding Ontario and its people as well as Canadians at large, given we’re the most populous province.”

Canada’s Plan for Border Security

In response to Trump’s November announcement of potentially imposing a universal 25% tariff on products from Canada and Mexico unless they address the drug trade and illegal immigration into the U.S., the Canadian government contemplated investing over $700 million for enhanced border security. The plan includes adding more officers and acquiring advanced equipment such as helicopters and drones for stricter border control.

Preparing for Retaliatory Actions

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To prepare for possible U.S. tariffs, Ford mentioned that Ontario, along with Canada’s federal finance minister and other provinces, would compile a list of goods for potential retaliatory tariffs against the U.S. “We need to be battle-ready. This confrontation is inevitable come January 20 or 21,” he alerted journalists, marking Trump’s inauguration day. “And it’s uncertain how extensive this conflict might become.”

Trade analysts caution against a tariff war, noting that both Canadian and American economies could suffer significant setbacks. The United States relies on Canada for natural gas and approximately 20% of its crude oil consumption. Patrick De Haan from GasBuddy predicted that U.S gas prices could see an increase from 30 to 40 cents per gallon—possibly reaching up to 70 cents—soon after Trump enacts his proposed tariffs.

Impact on U.S. Industries

In 2023 alone, Ontario directly provided electricity to over 1.5 million homes in the U.S., significantly contributing power exports particularly to Michigan, Minnesota, and New York states, which stand at risk should Trump implement his comprehensive tariff strategy covering Canada, Mexico, and China. Michigan’s auto industry, which accounts for nearly 19% of vehicles sold in the U.S., heavily depends on cross-border trade, making it vulnerable amidst these developments. Similarly critical is Illinois, hosting one of the country’s largest crude oil refineries relying predominantly on Canadian imports.

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Warnings of Economic Fallout

Fitch Ratings Group warned that if Trump enforces tariffs exactly as suggested, it could lead to an economic downturn reminiscent of levels last seen during the Great Depression era in America.

Economic experts also foresee harsh repercussions for Canada; stiff U.S. tariffs are likely to thrust its economy towards recession by 2025, resulting in heightened inflation rates prompting the Bank of Canada to hold back on interest rate reductions next year. Michael Davenport from Oxford Economics highlighted that sectors like energy and automotive manufacturing would bear severe impacts due to their heavy reliance on cross-border commerce, with reduced exports leading Canada’s GDP down by early 2026. Inflation could peak dramatically by mid-2025, accompanied by significant job losses and escalating unemployment rates nationally.

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