U.S. President Donald Trump has complained about unfair trade with Canada, but what specific concessions might he demand in trade negotiations?
Trump first flexed the threat of tariffs over border security concerns, but it is expected he will drive a tough bargain during his term as he seeks to renegotiate the free trade agreement with Canada and Mexico.
Insight into potential concessions Trump might seek can be drawn from the 2024 National Trade Estimate Report on foreign trade barriers, prepared by the Office of the U.S. Trade Representative under President Joe Biden’s administration.
Such reports reviewing trade obstacles with every country are released yearly, and some issues with Canada have been longstanding.
The latest report raises concerns about barriers to trade with Canada, particularly its agricultural supply management system, which regulates the dairy, egg, and poultry sectors. The system involves tariff-rate quotas, restricting U.S. producers’ ability to export to Canada beyond quota levels. Export from the United States into Canada exceeding these quotas are subject to “prohibitively high tariffs,” reaching 245 percent for cheese and 298 percent for butter, the report said.
During the NAFTA renegotiations in Trump’s first tenure, Canada made concessions on its supply management to secure America’s agreement by expanding U.S. access to Canada’s dairy market by 3.6 percent.
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Canada’s restrictions on bulk imports of fresh fruits and vegetables are another point of contention raised in the U.S. report. These limits, which apply to packages exceeding certain sizes, typically 50 kilograms, require importers to obtain a ministerial exemption by proving a domestic supply shortage for the imported goods. The U.S. report specifically highlighted the measure’s impact on U.S. potato growers, pledging to engage with Canadian authorities to ensure predictable market access and proper implementation of exemption procedures.
Another concern raised in the report is Canada’s restrictions on the sale of wine, beer, and spirits through provincial liquor control boards. These boards are the sole authorized sellers of alcohol in most provinces, creating market access barriers for U.S. exports, the report notes. Issues include cost-of-service markups, restrictions on product listings, and pricing controls, which hinder the ability of U.S. producers to compete effectively in the Canadian market, the report said.
The report also highlighted a more recent trade barrier involving the Liberal government’s Digital Services Tax, which became law in June 2024. The tax requires both foreign and domestic large businesses to pay taxes on certain revenue generated from online users in Canada. The U.S. government has expressed “serious concerns,” urging Canada not to impose such measures, the report said.
Trump has said that his country doesn’t need products from Canada.
“We don’t need them to make our cars, and they make a lot of them,” Trump said in a virtual participation at the World Economic Forum in Davos on Jan. 23. “We don’t need their lumber because we have our own forests. … We don’t need their oil and gas. We have our—we have more than anybody.”
The auto industry supply chain is closely linked between Canada and the United States. Canada is also the United States’ largest oil supplier.
“I don’t want to spend hundreds of millions of dollars on supporting the country unless that country [Canada] is a state,” Trump said this weekend. “I view it as, honestly, a country that should be a state,” he said, a theme Trump has repeated multiple times since winning the election in November.
Trump has said that he may impose 25 percent tariffs on Canada starting on Feb. 1 due to concerns about illegal immigrants and drugs crossing the Canadian border into the United States. Ottawa has said it is investing $1.3 billion into boosting border security and is also preparing for retaliatory action if needed.
The U.S. president has also signed an executive order for his officials to review all U.S. trade agreements and make recommendations to ensure revisions to “achieve or maintain the general level of reciprocal and mutually advantageous concessions with respect to free trade agreement partner countries.” It also asks the officials to investigate whether foreign countries are subjecting U.S. “citizens or corporations to discriminatory or extraterritorial taxes.”
