Should North Americans brace for a trade war?

Canada and Mexico are bracing for a North American trade war after President Trump threatened both countries with high tariffs and vowed to renegotiate their trade deal.

Mr. Trump vowed to impose a 25% tariff on imports from the US's closest allies as soon as February 1st while focusing on the countries' northern and southern borders.

Canada and Mexico have threatened to retaliate with similar tariffs on American products, as the US will likely push the countries to renegotiate their trade agreement.

USMCA replaced the previous deal, NAFTA, during President Trump's first term. The agreement will expire in 2026, but Trump Administration officials told the WSJ they wish to rush negotiations.

Canada's Prime Minister Justin Trudeau and Mexico's President Claudia Sheinbaum said they were ready to negotiate while trying not to escalate the situation. President Trump has not issued any official tariff orders.

Still, the threat has also pushed Canada and Mexico to battle each other in crossed declarations and accusations, mainly related to the auto industry and Mexico's ties to China.

Prime Minister Trudeau said his priority is the North American deal, only if Mexico pushes back against China, the Spanish newspaper El País said. Mexico's Claudia Sheinbaum and Mr. Trudeau discussed China's concerns during the G-20.

Canada’s approach to the threat has also been to remind Mr. Trump that his country will need vital Canadian energy resources if he wishes to advance the economy.

Canada is one of the most trade-dependent countries in the world, the AP said. Around 75% of its exports go to the US, so the country is also preparing to preserve that market ahead of USMCA negotiations.

Mexico's strategy, on the other hand, is taking things slow. "We have to keep cool heads," Claudia Sheinbaum told the media while reassuring her citizens she would defend the country's sovereignty.

After the G-20 meeting, the Mexican Finance Minister told the press that the country would announce a plan to reduce Chinese deals and encourage more North American production.

The country is also supporting Mr. Trump in stopping migrants from crossing the US border, the President-elect said on social media after a phone call with Mexico’s Claudia Sheinbaum before the inauguration.