Canada PM under pressure to stand up to Trump over tariff plan; US motorists could face higher gas prices – live

Other members of Canada’s parliament are calling on prime minister Justin Trudeau to ready a “war room” for the coming battle over tariffs with the United States.

“The only thing a bully responds to is strength. So where is our plan to fight back?” Jagmeet Singh, leader of the New Democratic Party, asked Trudeau. “Where is the war room?”

“I don’t think the idea of going to war with the United States is what anyone wants. What we will do is stand up for Canadian jobs,” Trudeau said. “Stand up for the prosperity we create when we work together.”

Meanwhile, members of Canada’s liberal and conservative parties are debating ways Trudeau could promote a “Canada First” policy or work collaboratively with “our US partner.”

Canadian prime minister Justin Trudeau is discussing the United States’ proposed tariffs with the leader of the opposition, Pierre Poilievre, before the Canadian parliament. Poilievre has criticized Trudeau, calling on him to “put Canada first” in its relations with the United States and do more to fix Canada’s “broken borders” and “liberalization of drugs”.

“The prime minister’s disastrous legalization and liberalization of drugs has the Americans worried,” Poilievre said. “Where’s the plan to stop the drugs and keep our border open to trade?”

Trump missed Kim?

Joanna Walters

Donald Trump’s team is discussing pursuing direct talks with North Korean leader Kim Jong Un, hoping a fresh diplomatic push can lower the risks of armed conflict, according to two people familiar with the matter, Reuters reports.

Several in Trump’s team now see a direct approach from Trump, to build on a relationship that already exists, as most likely to break the ice with Kim, years after the two traded insults and what Trump called “beautiful” letters in an unprecedented diplomatic effort during his first term in office, the people said.

The policy discussions are fluid and no final decisions have been made by the president-elect, the sources said.
Trump’s transition team did not respond to a request for comment.

What reciprocation Kim will offer Trump is unclear. The North Koreans ignored four years of outreach by outgoing president Joe Biden to start talks with no pre-conditions, and Kim is emboldened by an expanded missile arsenal and a much closer relationship with Russia.

We have already gone as far as we can on negotiating with the United States,” Kim said last week in a speech at a Pyongyang military exhibition, according to state media.

During his 2017-2021 presidency, Trump held three meetings with Kim, in Singapore, Hanoi, and at the Korean border, the first time a sitting US president had set foot in the country.

Their diplomacy yielded no concrete results, even as Trump described their talks as falling “in love.” The US called for North Korea to abandon its nuclear weapons, while Kim demanded full sanctions relief, then issued new threats.

North Korea has sent troops to fight alongside Russia in its war with Ukraine.

Trump tariffs on crude oil imports threatens higher gas prices for US motorists

Joanna Walters

Donald Trump’s pledge to impose 25% tariffs on Canadian and Mexican imports in his first day in office does not exempt crude oil from the trade penalties, two sources familiar with the plan told Reuters today.

Oil producers already warned that tariffs on crude would drive up the price of gas for US motorists, the FT reported earlier.

“A 25% tariff on oil and natural gas would likely result in lower production in Canada and higher gasoline and energy costs to American consumers while threatening North American energy security,” Lisa Baiton, head of the Canadian Association of Petroleum Producers, told the business-focussed newspaper.

In the vagaries of the markets and geopolitics, oil prices rose earlier on news of Trump’s tariffs pledge, over predictions they would discourage production, thereby raising prices, but now have dropped slightly, Reuters reports, on news of a pending ceasefire between Israel and Hezbollah in Lebanon, apparently because Wall Streeters, leaping 10 steps ahead, imagine it could lead to a relaxing of sanctions on Iran and therefore a glut of oil supply, suppressing prices….

Hello, US politics blog readers, it’s been a lively day for news so far, and we’ll continue to bring you all the developments as they happen.

Here’s where things stand:

• Canadian Prime Minister Justin Trudeau says he spoke to Donald Trump about potential tariffs on Canadian exporters to the US. This after Trump laid out his vision for tariffs on Canada, Mexico, and China on the Truth Social social media platform last night, which would see the US’s neighbors to the north and south get slapped with 25% tariffs, special fees, essentially, on all of their exports to the US in the new administration. Trudeau said he had “a good call” with the US president-elect. Many today view leaders as seeing this more as the opening salvo of a negotiation than an ultimatum from Trump.

• Tom Homan, Trump’s pick for what would be a newly-created position of ‘border czar’ is visiting the US-Mexico border today with Texas governor Greg Abbott. Both republicans are fiercely anti-immigration in favor of mass deportation of undocumented people in the US, and are longtime Trump loyalists. Homan told Fox News that he is willing to jail the mayor of Denver, Colorado, Mike Johnston, for saying he would resist federal attempts in a Trump administration to round up people for deportation in his city.

• Joe Biden and the first lady, Jill Biden, will attend Donald Trump’s inauguration in January, the White House said. “The president promised that he would attend the inauguration of whomever won the election. He and the first lady are going to honor that promise and attend the inauguration,” the White House’s senior deputy press secretary Andrew Bates told reporters yesterday.

• Mexico’s new president, Claudia Sheinbaum, suggests that the country could retaliate with tariffs of its own against the US and international observers believe such a stance could indicate that Trump faces a much different Mexican leader than he did in his first term, 2016-2020. Andrés Manuel López Obrador, whom Sheinbaum succeeded earlier this year, ended up quite chummy with Trump. They struck a deal in which Mexico helped keep migrants away from the border with the US – and received other countries’ deported migrants from the US – and Trump backed down on tariff threats against Mexico in return. Sheinbaum might not be so acquiescent.

• Sheinbaum said she will send a letter to Trump to warn him that his pledge to impose across-the-board tariffs of 25% on Mexico and Canada will cause inflation and job losses in both countries. “To one tariff will come another and so on, until we put our common businesses at risk,” Sheinbaum said at a press conference earlier today.

• Trump argues that tariffs will not only bring more production back to the US but will also coerce Mexico and China, in particular, to crackdown on migrants heading for the US-Mexico border and on illicit fentanyl producers, dealers and smugglers who then get the addictive and dangerous opioid taken into the US for sale on the illegal market. Meanwhile a spokesperson for China’s foreign ministry said that the US should not “take China’s goodwill for granted” in counternarcotics cooperation and that “fentanyl is an issue for the US”.

• The Canadian province of Quebec’s premier, François Legault, says Canada must do “everything possible” to avoid Trump imposing a tariff of 25% on Canadian products. In a post on X, he said the move by Trump “poses an enormous risk to the Quebec and Canadian economies”. He calls for border integrity to be a federal government priority. Earlier, Ontario’s premier, Doug Ford, said tariffs would be “devastating” to workers and jobs in the US and Canada.

• Research by ING has estimated that if the costs of the new tariffs are fully passed on to consumers, then Americans will face having to pay $2,400 more per capita annually for goods. The report says that also taking into account potential labour shortages due to Trump’s plans to crackdown on immigration – with a vow to stage the “largest deportation operation in American history” – there could be a 1% increase in inflation in the US.

• Beijing has told Trump that “nobody will win in a trade war” after the president-elect vowed to sign an executive order imposing a 25% tariff on all products coming in to the United States from Mexico and Canada, with additional tariffs on China.

Trump laid out his vision for tariffs on Canada, Mexico, and China on the Truth Social social media platform last night, which would see the US’s neighbors to the north get slapped with 25% tariff on all of its exports to the US.

“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump wrote.

Roughly 77% of Canadian exports go to the US, according to the Toronto Region board of trade. Trade experts warned of sweeping economic consequences for all those involved.

Trudeau hopped on a call with the president-elect today, and afterward said “it was a good call,” adding that they “obviously talked about laying out the facts, talking about how the intense and effective connections between our two countries flow back and forth.”

Trump’s pick for border czar, Tom Homan, is visiting the US-Mexico border today with Texas governor Greg Abbott.

Both republicans are immigration hawks and longtime Trump loyalists.

Homan told Fox News host Sean Hannity that he is willing to jail Denver Mayor Mike Johnston for protesting his mass deportation.

The acting former acting director of Immigration and Customs Enforcement said: “Me and the Denver mayor, we agree on one thing – he’s willing to go to jail. I’m willing to put him in jail because there there’s a statute. It’s Title 8 United States Code 1324 (iii). And what it says is it’s a felony if you knowingly harbor and conceal an illegal alien from immigration authorities. It’s also a felony to impede a federal law enforcement officer.”

Homan is also a former Heritage Foundation fellow and Project 2025 contributor.

10 observations and ramifications about Trump’s tariff announcement

Mark Sweney

Deutsche Bank has published ten conclusions, ramifications and observations following Donald Trump’s announcement of the impending imposition of a 25% tariff on products from Mexico and Canada, and 10% on Chinese imports, that he intends to make policy when he formally enters the White House on 20 January.

1. Free trade agreements (FTAs) are not safe

Canada and Mexico are part of the United States-Mexico-Canada Agreement (USMCA) which was negotiated by Trump himself. It is clear that even countries with existing agreements with the US can be subject to tariffs.

2. Right after the Treasury Secretary announcement

Tariffs are being announced just a few hours after the nomination of Scott Bessent as Treasury Secretary. This is pushback to the argument that tariffs are taking a backseat to the Trump agenda.

3. The tariffs cover 40% of total US trade

While only limited to three countries, the impact is economically large at it applies to America’s three largest trading partners after the Euro-area.

4. Presidential authority, for now

It is explicitly mentioned that executive authority will be used to impose these tariffs rather than the legislative route. We suspect that the most likely avenue will the International Economic Emergency Powers Act (IEEPA).

5. Tactical and transactional, for now

The announcement is only targeted at three countries and leaves the prospect of tariff removal open. There is no mention of tariffs as a strategic tool to deal with trade imbalances or as a revenue-raiser.

The optimistic take is that this means that some of the most extreme scenarios under universal tariffs will not happen. The pessimistic interpretation (which we favour) is that this is an opening salvo and the targeted focus on immigration and drugs is required to trigger broad-based executive authority under the IEEPA.

6. Watch the China legislation in Congress

Just last week a new bill was submitted to the Senate removing permanent trade relations with China and targeting 50%-100% tariffs. There is already a similar bill in the US House of Representatives. For us, whether the tariff discussion turns strategic via legislation is a big outstanding question to be resolved.

7. Beware complex supply chains

EUR/USD is reacting with relief that no mention of European trade was made. But note for example that German car manufacturers have huge production capacity in Mexico that is then on-sold to the US. Also note the complex inter-play of Chinese and Mexico trade which makes the negative impact of tariffs on Mexico even bigger.

8. Canada most under-priced

The Canadian dollar has had the largest risk-adjusted weakening move since the tariffs were announced. Canada is the most vulnerable developed market country to extra tariffs but also the least under-priced in terms of risks.

9. The softer the market reaction, the greater the likelihood of more tariffs

The equity market reaction has so far been very benign, we would argue likely on the back of the transactional interpretation. That US domestic small-caps have been leading the recent market rally also helps reduce the impact.

The first Trump administration showed that the more benign the market reaction, the greater the likelihood of further escalation.

10. Truth Social is the new avenue for announcements

During the first Trump administration, it was Twitter. Market participants need to be watching the President’s new social media platform now.