Business
Trump’s trade war and what it means for Canada

From the Fraser Institute
We didn’t want it but it has crashed onto our shores anyway. U.S. President Donald Trump has unleashed his long-mooted assault on Canada, deploying tariffs as his chosen weapon of “economic coercion.” The Executive Order justifying 25 per cent across-the-board tariffs on southbound Canadian exports (10 per cent on exports of energy and critical minerals) cites American concerns over cross-border drug shipments. Yet that can hardly be the real reason for Trump’s unprecedented action. Canada is at most a tiny part of America’s festering problem of widespread illegal drug use. The notion that these punitive tariffs are mainly about compelling Canada to clamp down on fentanyl production is far-fetched.
It is obvious that this most unconventional of American presidents has other aims in mind. One may be to impose steep tariffs on all or most imports entering his country as a means to raise money for the cash-strapped U.S. treasury. A second may be to suck industrial production and capital out of Canada and other trading partners, to support the MAGA movement’s objective of rebuilding American manufacturing. In his remarks delivered (virtually) to the good and the great assembled at the World Economic Forum’s shindig in Davos in January, President Trump put much emphasis on this latter point. Or perhaps what the new U.S. administration most wants is to convince Canada (and other trading partners) to align with American policies to de-couple from and slow the economic and military ascent of China.
If some or all of these are indeed Mr. Trump’s most important goals, it will be difficult for Canada to negotiate our way out of the bilateral trade war. As hard as it may be to imagine, Trump’s tariffs–with the possibility of even higher levies and various other trade restrictions still to come–could be the new “normal” for Canada, at least for the duration of his presidency. For the moment, the trilateral Canada-U.S.-Mexico trade agreement is either dead or at best barely clinging to life.
As the tariff war gets underway, it is useful to look at the composition of Canada-U.S. trade. Most of it involves cross-border trade in “intermediate inputs,” not finished goods or final products (see the accompanying table). More than three-fifths of Canada’s U.S.-bound exports consist of energy, building materials, agri-food products, other raw materials, and other items used to produce final goods. Similarly, over half of all U.S. goods shipped to Canada are also made up of intermediate inputs. Capital goods (e.g., machinery and equipment) represent 16 to 23 per cent of bilateral merchandise trade. Final goods constitute between a fifth and a quarter of the total. This underscores the highly integrated nature of North American supply chains–and the significant disruptions that two-way tariffs will cause for many industries operating on both sides of the border.
Composition of Canada-U.S. Merchandise Trade, 2023 (% of total exports) | ||
---|---|---|
Canadian exports to the U.S. | U.S. exports to Canada | |
Final goods | 21% | 25% |
Capital goods* | 16% | 23% |
Intermediate inputs | 63% | 52% |
*e.g., machinery and equipment
Source: Canadian Chamber of Commerce, Data Lab.
Looking ahead, it’s clear our economy is about to suffer, as Canadian industries, workers and communities absorb the biggest external shock in a century (apart from during the initial phases of the COVID pandemic). To see why, recall that the U.S. buys more than three-quarters of Canada’s international exports, with the value of our U.S.-destined shipments amounting to about one-fifth of Canada’s GDP.
According to projections published by the Bank of Canada, 25 per cent U.S. tariffs coupled with Canadian retaliatory tariffs will reduce the level of Canadian real GDP by at least 3 per cent over 2025-26–this represents a permanent output loss, meaning it is national income we will never recoup. Business fixed non-residential investment falls by 12 per cent, with exports dropping by nine per cent. Unemployment rises significantly and job creation downshifts. Consumer spending also weakens–in part because retaliatory Canadian tariffs raise the cost of many consumer goods, thus leading to a temporary bump in Canadian inflation. All of these estimates are measured relative to a counterfactual baseline scenario of no U.S. and Canadian tariffs. The U.S. economy will also take a hit from President Trump’s tariffs, notably through higher inflation, increased business uncertainty, and the costs of rejigging the supply chains of American companies that rely significantly on raw materials, other inputs and consumer goods supplied by Canada and Mexico.
How should Canada respond to the American tariffs? An initial priority is to determine if there is a pathway to a negotiated settlement–not a simple task, as the Americans have yet to specify what it would take to make peace. A second option is to hit back. Canada has already announced a schedule for retaliatory tariffs, covering some $155 billion of goods imported from the United States; all of these are slated to be in place by the end of March. While the political impulse and pressure to respond in kind is understandable, retaliation will magnify the economic damage to Canada from the U.S. tariffs. Finding a way to end the conflict–if that is possible–is far superior to a series of tit-for-tat bilateral tariffs.
Some politicians and media commentators have talked up “trade diversification” as an option for Canada. Reduced reliance on the U.S. would likely deliver benefits in the long-term, but it won’t help us in 2025/26. Despite entering into 15 trade agreements with 51 nations (other than the U.S.), Canada has seen virtually no export market diversification in the last two decades. There has been modest diversification on the import side of the trade ledger, mainly due to the growing importance of China and other Asian emerging markets as suppliers of final goods and some intermediate inputs. But the U.S. remains the source of more than half of Canada’s imports of goods and services combined. Moreover, “gravity models” of international trade confirm that Canada’s dense, extensive web of trade and other commercial ties with the United States makes perfect economic sense given the advantages of geographic proximity, a common language, and similar business practices between the two countries.
The Trump administration’s self-chosen trade war is a watershed moment for Canadian foreign and commercial policy. The shock from this U.S. action will persist, even if the tariffs are in place for only a few months. Treating an ally as an enemy is an abnormal practice in the history of Western diplomacy. But with Donald Trump at the helm, the past is no longer a reliable guide to understanding or forecasting American policy.
Banks
TD Bank Account Closures Expose Chinese Hybrid Warfare Threat

From the Frontier Centre for Public Policy
Scott McGregor warns that Chinese hybrid warfare is no longer hypothetical—it’s unfolding in Canada now. TD Bank’s closure of CCP-linked accounts highlights the rising infiltration of financial interests. From cyberattacks to guanxi-driven influence, Canada’s institutions face a systemic threat. As banks sound the alarm, Ottawa dithers. McGregor calls for urgent, whole-of-society action before foreign interference further erodes our sovereignty.
Chinese hybrid warfare isn’t coming. It’s here. And Canada’s response has been dangerously complacent
The recent revelation by The Globe and Mail that TD Bank has closed accounts linked to pro-China groups—including those associated with former Liberal MP Han Dong—should not be dismissed as routine risk management. Rather, it is a visible sign of a much deeper and more insidious campaign: a hybrid war being waged by the Chinese Communist Party (CCP) across Canada’s political, economic and digital spheres.
TD Bank’s move—reportedly driven by “reputational risk” and concerns over foreign interference—marks a rare, public signal from the private sector. Politically exposed persons (PEPs), a term used in banking and intelligence circles to denote individuals vulnerable to corruption or manipulation, were reportedly among those flagged. When a leading Canadian bank takes action while the government remains hesitant, it suggests the threat is no longer theoretical. It is here.
Hybrid warfare refers to the use of non-military tools—such as cyberattacks, financial manipulation, political influence and disinformation—to erode a nation’s sovereignty and resilience from within. In The Mosaic Effect: How the Chinese Communist Party Started a Hybrid War in America’s Backyard, co-authored with Ina Mitchell, we detailed how the CCP has developed a complex and opaque architecture of influence within Canadian institutions. What we’re seeing now is the slow unravelling of that system, one bank record at a time.
Financial manipulation is a key component of this strategy. CCP-linked actors often use opaque payment systems—such as WeChat Pay, UnionPay or cryptocurrency—to move money outside traditional compliance structures. These platforms facilitate the unchecked flow of funds into Canadian sectors like real estate, academia and infrastructure, many of which are tied to national security and economic competitiveness.
Layered into this is China’s corporate-social credit system. While framed as a financial scoring tool, it also functions as a mechanism of political control, compelling Chinese firms and individuals—even abroad—to align with party objectives. In this context, there is no such thing as a genuinely independent Chinese company.
Complementing these structural tools is guanxi—a Chinese system of interpersonal networks and mutual obligations. Though rooted in trust, guanxi can be repurposed to quietly influence decision-makers, bypass oversight and secure insider deals. In the wrong hands, it becomes an informal channel of foreign control.
Meanwhile, Canada continues to face escalating cyberattacks linked to the Chinese state. These operations have targeted government agencies and private firms, stealing sensitive data, compromising infrastructure and undermining public confidence. These are not isolated intrusions—they are part of a broader effort to weaken Canada’s digital, economic and democratic institutions.
The TD Bank decision should be seen as a bellwether. Financial institutions are increasingly on the front lines of this undeclared conflict. Their actions raise an urgent question: if private-sector actors recognize the risk, why hasn’t the federal government acted more decisively?
The issue of Chinese interference has made headlines in recent years, from allegations of election meddling to intimidation of diaspora communities. TD’s decision adds a new financial layer to this growing concern.
Canada cannot afford to respond with fragmented, reactive policies. What’s needed is a whole-of-society response: new legislation to address foreign interference, strengthened compliance frameworks in finance and technology, and a clear-eyed recognition that hybrid warfare is already being waged on Canadian soil.
The CCP’s strategy is long-term, multidimensional and calculated. It blends political leverage, economic subversion, transnational organized crime and cyber operations. Canada must respond with equal sophistication, coordination and resolve.
The mosaic of influence isn’t forming. It’s already here. Recognizing the full picture is no longer optional. Canadians must demand transparency, accountability and action before more of our institutions fall under foreign control.
Scott McGregor is a defence and intelligence veteran, co-author of The Mosaic Effect: How the Chinese Communist Party Started a Hybrid War in America’s Backyard, and the managing partner of Close Hold Intelligence Consulting Ltd. He is a senior security adviser to the Council on Countering Hybrid Warfare and a former intelligence adviser to the RCMP and the B.C. Attorney General. He writes for the Frontier Centre for Public Policy.
Automotive
Major automakers push congress to block California’s 2035 EV mandate

MxM News
Quick Hit:
Major automakers are urging Congress to intervene and halt California’s aggressive plan to eliminate gasoline-only vehicles by 2035. With the Biden-era EPA waiver empowering California and 11 other states to enforce the rule, automakers warn of immediate impacts on vehicle availability and consumer choice. The U.S. House is preparing for a critical vote to determine if California’s sweeping environmental mandates will stand.
Key Details:
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Automakers argue California’s rules will raise prices and limit consumer choices, especially amid high tariffs on auto imports.
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The House is set to vote this week on repealing the EPA waiver that greenlit California’s mandate.
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California’s regulations would require 35% of 2026 model year vehicles to be zero-emission, a figure manufacturers say is unrealistic.
Diving Deeper:
The Alliance for Automotive Innovation, representing industry giants such as General Motors, Toyota, Volkswagen, and Hyundai, issued a letter Monday warning Congress about the looming consequences of California’s radical environmental regulations. The automakers stressed that unless Congress acts swiftly, vehicle shipments across the country could be disrupted within months, forcing car companies to artificially limit sales of traditional vehicles to meet electric vehicle quotas.
California’s Air Resources Board rules have already spread to 11 other states—including New York, Massachusetts, and Oregon—together representing roughly 40% of the entire U.S. auto market. Despite repeated concerns from manufacturers, California officials have doubled down, insisting that their measures are essential for meeting lofty greenhouse gas reduction targets and combating smog. However, even some states like Maryland have recognized the impracticality of California’s timeline, opting to delay compliance.
A major legal hurdle complicates the path forward. The Government Accountability Office ruled in March that the EPA waiver issued under former President Joe Biden cannot be revoked under the Congressional Review Act, which requires only a simple Senate majority. This creates uncertainty over whether Congress can truly roll back California’s authority without more complex legislative action.
The House is also gearing up to tackle other elements of California’s environmental regime, including blocking the state from imposing stricter pollution standards on commercial trucks and halting its low-nitrogen oxide emissions regulations for heavy-duty vehicles. These moves reflect growing concerns that California’s progressive regulatory overreach is threatening national commerce and consumer choice.
Under California’s current rules, the state demands that 35% of light-duty vehicles for the 2026 model year be zero-emission, scaling up rapidly to 68% by 2030. Industry experts widely agree that these targets are disconnected from reality, given the current slow pace of electric vehicle adoption among the broader American public, particularly in rural and lower-income areas.
California first unveiled its plan in 2020, aiming to make at least 80% of new cars electric and the remainder plug-in hybrids by 2035. Now, under President Donald Trump’s leadership, the U.S. Transportation Department is working to undo the aggressive fuel economy regulations imposed during former President Joe Biden’s term, offering a much-needed course correction for an auto industry burdened by regulatory overreach.
As Congress debates, the larger question remains: Will America allow one state’s left-wing environmental ideology to dictate terms for the entire country’s auto industry?
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