The premier of Canada's most populous province on Wednesday threatened to cut off energy supplies to the U.S. if President-elect Donald Trump implements his proposed tariffs on Canadian goods. This bold move highlights the escalating tensions between the two nations as they grapple with potential trade conflicts.

"We will go to the full extent depending how far this goes. We will go to the extent of cutting off their energy, going down to Michigan, going down to New York State and over to Wisconsin," Ontario Premier Doug Ford said during a press conference following a virtual meeting with Canadian Prime Minister Justin Trudeau and other provincial premiers to discuss Trump's tariff threat. "I don't want this to happen, but my No. 1 job is to protect Ontario, Ontarians and Canadians as a whole since we're the largest province."

Trump in November threatened to impose a blanket 25% tariff on all products from Canada and Mexico unless the two countries take action to curb the flow of drugs and unauthorized migrants to the U.S.

The Canadian government said it was considering spending the equivalent of more than $700 million to better protect the border. In a bid to avert new U.S. tariffs, the plan would increase the number of officers and buy additional equipment, such as helicopters and drones, to tighten border crossings.

Ford said his province, Canada's federal minister of finance and other provinces will put together a list of items on which the country could impose retaliatory tariffs against the U.S.

"We need to be ready to fight. This fight is 100% coming on Jan. 20 or Jan. 21," he said to reporters, referencing Trump's inauguration date, "and we don't know to what extent this fight is going to go."

Both Canada and U.S. would lose
Analysts warn that dueling tariffs would harm both the U.S. and Canadian economies. Canada provides natural gas to the U.S. and roughly 20% of the crude oil used by its southern neighbor. Patrick De Haan, head of petroleum analysis at GasBuddy, has forecast that U.S. gas prices could jump 30 to 40 cents a gallon, and potentially up to 70 cents, shortly after Trump's tariffs took effect.

In 2023, Ontario also directly supplied electricity to 1.5 million U.S. homes and is a major exporter of power to Michigan, Minnesota and New York.

Midwestern states in particular could face serious risks if Trump's plan for tariffs on Canada, Mexico and China goes into effect. Michigan and Illinois rely heavily on imports from Canada, Mexico, and China, which account for 19% and 12% of their state GDPs, respectively, according to analysts at Fitch Ratings Group. Michigan, which produces nearly 19% of vehicles sold in the U.S., particularly depends on cross-border trade. Meanwhile, Illinois, home to the fourth-largest crude oil refinery in the country, sources most of its crude oil from Canada.

"If enacted precisely as proposed, the broad tariffs proposed by President-elect Trump could pose a notable economic shock with tariff rates rising to levels not seen in the U.S. since the Great Depression," according to a recent analysis by Fitch.

Experts also warn that stiff U.S. tariffs would likely push the Canadian economy into a recession in 2025, causing a spike in inflation and forcing the Bank of Canada to pause interest rate cuts next year. According to a recent report from Michael Davenport, an economist with Oxford Economics, Canada's energy, auto and heavy manufacturing sectors would be hit hardest because of the high degree of cross-border trade in these industries.

"25% U.S. tariffs along with proportional retaliatory tariffs would reduce Canada's exports and cause its GDP to fall 2.5% peak-to-trough by early-2026. Inflation would surge to 7.2% by mid-2025, and 150,000 layoffs would lift the unemployment rate to 7.9% by year-end," Davenport said.

During his first term in office, Trump imposed tariff on Canadian steel and aluminum exports. Canada retaliated with its own duties on U.S products such as whiskey and yogurt coming from a plant in Wisconsin.

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