United States President Donald Trump’s objective is to destroy Canada’s economy so he can annex the country, Prime Minister Justin Trudeau said during a fiery news conference about the start of a trade war between the countries.

Trump put the tariffs in place on Tuesday, saying Canada and Mexico have not done enough to crack down on drug trafficking. But in Canada’s case, that’s just a pretext for tariffs the U.S. president planned to impose anyway, Trudeau said.

“The excuse that he’s giving for these tariffs today of fentanyl is completely bogus, completely unjustified, completely false,” Trudeau said. “What he wants is to see a total collapse of the Canadian economy because that’ll make it easier to annex us.”

Trump has repeatedly said that Canada can avoid tariffs if it becomes the 51st U.S. state. Canadian officials initially dismissed the remark as a joke, but it took on a more menacing tone in January when Trump pledged to use “economic force” to overtake the country. Trudeau told a group of business leaders last month that he believes the threat is real.

The president slapped 10 per cent tariffs on Canadian energy products and 25 per cent duties on everything else the country buys from Canada and Mexico. Trudeau’s government hit back with levies targeting $30 billion in American products including cosmetics, appliances, tires, fruit and wine.

If Trump’s levies stay in place, Canada’s tariffs will be expanded in three weeks to a broader range of goods worth $155 billion in annual imports from U.S. producers. The second phase will hit American-made vehicles as well as aluminum and aerospace products.

Trump responded Tuesday with a social media post that referred to “Governor Trudeau” and said that with Canada’s retaliation, “our Reciprocal Tariff will immediately increase by a like amount!” Trump intends to impose so-called reciprocal tariffs on products from nations around the world on April 2.

In addition to retaliatory tariffs, Trudeau said his government will file dispute resolution claims at the World Trade Organization and through the free trade agreement between the U.S., Mexico and Canada. Both federal and provincial governments are also in discussions to pursue non-tariff measures that will demonstrate that “there are no winners in a trade war,” he said.

Canada’s economy is heavily reliant on the ability to sell goods and resources to the U.S., and many of its businesses and consumers also depend on American-made imports from machinery to food. If the tariffs remain in place, the country appears certain to fall into recession, with economists seeing as much as a 4 percentage-point hit to gross domestic product.

The trade war comes at a politically challenging time in Canada. Trudeau will step down soon after his Liberal Party elects a new leader to replace him on Sunday. A general election is also expected in the months ahead. The Parliament is currently suspended until March 24, but some business leaders and politicians are now pushing for an emergency session to pass relief measures for businesses and workers.

“Political and policy uncertainty is the last thing the country needs at this moment,” said Dan Kelly, president of the Canadian Federation of Independent Business.

Conservative Party Leader Pierre Poilievre slammed Trudeau for shuttering the legislature, and said the government should immediately slash taxes and regulations to fuel growth in Canada. Poilievre said revenue collected from retaliatory tariffs should go almost entirely to cutting taxes, with “a small sum set aside for targeted relief to workers hardest hit by the trade war.” New Democratic Party Leader Jagmeet Singh also called on Trudeau to recall Parliament to enact assistance for Canadian workers.

Amid the parliamentary vacuum, provincial government leaders have stepped up to craft their own response to U.S. tariffs. Ontario Premier Doug Ford threatened a 25 per cent export tax on electricity exports to the U.S. and announced plans to pull U.S. alcohol from government-owned liquor stores. British Columbia Premier David Eby said liquor from Republican states would be yanked from shelves, and that B.C. products an suppliers would be favored in government procurement.

‘Forever Changed’

The first phase of tariffs are about spurring more actions to stop of the illicit flow of fentanyl and are “not a trade war,” U.S. Commerce Secretary Howard Lutnick said Tuesday on CNBC. Canada will face another phase of tariffs on April 2 when the Trump administration will “reset trade policy,” Lutnick said.

Trudeau’s government has unveiled a $1.3 billion border security plan to increase aerial surveillance and personnel at the crossing, even though less than one per cent of the fentanyl seized by U.S. border agents was captured at or near the Canadian border.

Trump repeated a false claim Tuesday that U.S. banks are not allowed to do business in Canada. This talking point, which he first raised about a month ago, isn’t true — U.S. banks had $113 billion in Canadian assets as of Nov. 30, a figure Trudeau cited at the news conference.

“American banks are alive and well and prospering in Canada,” Trudeau said.

Unions in the U.S. and Canada said the tariffs will hurt both economies.

“Canadian and American workers are not in competition — we build goods together,” said United Steelworkers International President David McCall. “These tariffs will hurt manufacturing, drive up costs and kill jobs on both sides of the border.”

Unifor President Lana Payne agreed, saying Trump “has misjudged how damaging this trade war will be for American workers.” She called on Canadians to build a more resilient economy. “Today our trade relationship forever changed with the U.S.”

Trudeau opened his news conference Tuesday by stating that the U.S. has launched a trade war against its closest ally while talking about working positively with “lying, murderous dictator” Russian President Vladimir Putin. “Make that make sense,” Trudeau said.

The prime minister also spoke directly to Americans.

“Your government has chosen to put American jobs at risk,” he said. “They’ve chosen to raise costs for American consumers on everyday essential items like groceries and gas, on major purchases like cars and homes and everything in between.”

He also had a message for Trump: “This is a very dumb thing to do.”

—With assistance from Stephanie Lai and Christine Dobby.

Bloomberg.com