CANADA TRENDS AND DEVELOPMENTS Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
Canada at War The United States wants to annex Canada, using tariffs and turmoil (so far) as weapons. Canada is fighting back. The resulting uncertainty creates risks and opportunities for deal makers. Introduction It seemed like a joke at first. On 29 November 2024, Prime Minister Justin Trudeau made an unannounced visit to Mar-a-Lago after President- Elect Donald Trump had threatened Canada with tariffs. According to sources, Mr Trudeau told Mr Trump that he cannot levy the tariffs because it would kill the Canadian economy completely. Mr Trump then suggested that Canada become the 51st state. The prime minister laughed nerv- ously. No one is laughing now. On taking office in January 2025, President Trump followed through on his threats and announced a 25% tariff on all Canadian goods. He said that he would lift them if America could annex Canada. Mr Trump confirmed in an inter - view on 9 February 2025 that his threat to absorb Canada is “a real thing” . On 4 March 2025, at 12:01 a.m., the tariffs came into effect. Canada responded immediately with its own tariffs and promised further non-tariff retaliation. This is more than just a trade war. In an article for The Economist, Chrystia Freeland, the for - mer deputy prime minister of Canada, wrote that these threats represent such a gross violation of international norms that they put the entire basis of global trade rules and international relations at risk. She believes future historians may judge this moment as “marking the end of the rules- based international order that was built atop the bloody ruins of the Second World War and that has brought peace and prosperity to so many for so long” .
Since then, the United States has announced sig- nificant tariffs, and then paused them, on dozens of countries. The basis for the tariffs is bizarrely random. Famously, the United States imposed a 10% tariff on all exports from the Heard Island and the McDonald Islands, which are home to four kinds of penguins but no humans. The widespread havoc of the illogical and, as many consider, illegal, whipsaw tariffs has caused a global stock market crash and raised a very real possibility of a global recession. What comes next is anyone’s guess. Tariffs can cause prices to rise and growth to slow. The uncertainty about the nature and extent of the tariffs and escalating reciprocal tariffs, combined with the larger geo-political threats, are expected to make deal makers cautious. However, there exist significant areas of opportunity in a num - ber of sectors. The authors anticipate that 2025 will be a challenging year for deal makers, for Canada, and for the world. The economic uncertainty is slowing M&A activity This time last year, the authors wrote that the prospect of a second presidency for Donald Trump raised the possibility of increased tariffs and trade wars, resulting in greater uncertainty for businesses. For the most part, it appears that businesses shrugged off the risk. Markets soared through 2024, businesses expanded and deals kept getting done. Now that Mr Trump is president and the risk of tariffs is real, business - es are carefully considering the impact tariffs will have. M&A activity in Canada was set to improve in 2025 as interest rates fell and investor confi - dence improved. However, the threat of tariffs creates significant uncertainty for businesses and is making acquirors in affected industries
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