Canadian Prime Minister Mark Carney’s high-profile debut on the world stage at the World Economic Forum in Davos has gone viral at home — but it has also triggered a fierce backlash from U.S. President Donald Trump and his inner circle, sharpening concerns that Ottawa’s already-delicate trade relationship with Washington could deteriorate further just months before a critical review of the United States-Mexico-Canada Agreement (USMCA).
Carney’s Davos speech, which urged smaller and middle powers to band together against the economic coercion of “great powers,” was initially greeted with a standing ovation and effusive praise from parts of the global elite. Yet within days, the applause gave way to anxiety, as Trump and senior U.S. officials interpreted the remarks as a direct challenge to American economic dominance — and, by extension, to the trade pact that underpins nearly C$1.3 trillion in two-way merchandise trade between Canada and the United States.
The escalating war of words has reignited fears on both sides of the border that political brinkmanship could torpedo the USMCA review, a mandatory process that could result in the agreement’s renewal, modification, or collapse. For Canada, whose economy is deeply integrated with the U.S. market, the stakes could hardly be higher.
Trump wasted little time responding. Speaking at Davos the day after Carney, the president dismissed Canada’s economic independence in blunt terms.
“Canada lives because of the United States,” Trump told the global audience, reviving familiar grievances that Canada “gets a lot of freebies” and should show greater gratitude for access to the U.S. market.
Carney fired back the following day during a Cabinet retreat in Quebec City, inserting a last-minute line into a speech focused on his domestic agenda.
“Canada doesn’t live because of the United States,” he said. “Canada thrives because we are Canadian.”
The exchange marked a sharp escalation in tone — and it did not end there. Within hours, Trump revoked Canada’s invitation to participate in his proposed Gaza “Board of Peace” initiative, without offering an explanation. On Friday, he took another swipe at Ottawa on Truth Social, mocking Canada’s trade posture and hinting darkly at its dealings with China.
For many observers, the feud evoked memories of Trump’s public clash with former prime minister Justin Trudeau at the 2018 G7 summit in Quebec — a rupture that rattled markets and strained diplomatic ties.
Goldy Hyder, president of the Business Council of Canada, which represents the country’s largest CEOs, said the reaction he encountered during several days in Washington underscored the risks Carney now faces.
“Obviously, the response from the Americans suggests that some harm has been done,” Hyder said in an interview Friday. “I don’t believe it to have been significant or fatal, but I do think we need to make sure we’re sending the signals that we care about this agreement.”
Hyder said U.S. lawmakers and business leaders were blunt in their criticism, warning that Ottawa appeared disengaged at a moment when Mexico was actively working to resolve trade irritants with Washington.
During a 90-minute meeting with officials at the Office of the United States Trade Representative (USTR), Hyder said he was told Mexico was making “great progress” — progress that had tangible benefits.
“They have the lowest tariff rate in the world as a result of it, lower than ours,” Hyder said. “We’re now not engaged, we’re not conversing, and we’re waiting for the Americans to call us. Why would they call us to lower the tariffs that they’re imposing on us? We need to lean in.”
Even among Carney’s natural allies, enthusiasm for his Davos message cooled as the diplomatic fallout became clear.
European Central Bank President Christine Lagarde, who earlier in the week had walked out of a dinner with U.S. Commerce Secretary Howard Lutnick during what was described as an anti-Europe speech, publicly distanced herself from Carney’s framing.
“I’m not exactly on the same page as Mark,” Lagarde said during a panel discussion. Rather than rallying against great powers, she argued, countries should focus on identifying vulnerabilities and dependencies in their own economies.
“We should be talking about alternatives,” she said. “We should be identifying… the weaknesses, the sore points, the dependencies, the autonomy.”
U.S. officials pile on
Trump’s top economic officials were less diplomatic.
In an interview from Davos, Commerce Secretary Howard Lutnick called Carney “arrogant” and criticized his outreach to China, suggesting it would count against Canada during the USMCA review.
“This is the silliest thing I’ve ever seen,” Lutnick said, dismissing the notion that China would significantly increase imports from Canada. “They have the second-best deal in the world. Give me a break.”
Lutnick said Mexico enjoyed the best deal under USMCA, followed by Canada, noting that roughly 85 percent of Canadian exports enter the U.S. tariff-free.
Treasury Secretary Scott Bessent accused Carney of engaging in “value signaling” rather than pragmatic diplomacy.
“If he believes what’s best for Canada is to make speeches like that… then he should make speeches like that,” Bessent said. “But in the context of the United States, I’ll point out the Canadian economy is smaller than the economy of Texas.”
Bessent added that Trump had stood up to China over its manipulation of the rare-earths market and suggested Carney should be thanking Washington rather than criticizing it.
U.S. Trade Representative Jamieson Greer also questioned the wisdom of Canada’s China strategy, floating the possibility that Washington could pursue separate trade deals with Canada and Mexico — a move that would fundamentally reshape North American economic integration.
Back in Canada, Carney’s Cabinet publicly closed ranks.
“There are always going to be stressful times, and let’s not sugarcoat it,” Artificial Intelligence Minister Evan Solomon said. “It’s a difficult world.”
Finance Minister François-Philippe Champagne defended the prime minister’s remarks, saying Carney had simply articulated views many leaders privately shared.
“He said a lot of things that people thought,” Champagne said. “And he had the courage to say it loud.”
Some international voices echoed that sentiment. Greenland’s Energy and Industry Minister Naaja Nathanielsen called Carney’s speech “brilliant” and praised its clarity at a moment of global uncertainty.
Yet seasoned diplomats and trade veterans struck a more cautious tone.
Louise Blais, a former Canadian deputy ambassador to the United Nations, warned that the optics in Washington were deeply damaging.
“Canada thinks that we’re pushing back on the Americans blackmailing us,” she said. “But to the White House mind, it looks as if we are ungrateful.”
Blais, now a senior adviser to a U.S. consultancy and to Hyder’s council, said Canada had given Washington “a lot of ammunition” ahead of the USMCA review.
“The damage could be eight out of 10,” she said. “But it’s really totally up to the Americans.”
Trade talks were expected to resume earlier this year after Trump abruptly halted them in October, reportedly angered by an Ontario government advertisement opposing U.S. tariffs that used the voice of Ronald Reagan.
Hyder said Carney appeared to have convinced himself that Trump has no intention of renewing USMCA — a belief Hyder warned could become a “self-fulfilling prophecy.”
“It’s not too late to recognize the opportunity to still get this agreement across the finish line,” he said. “But we need to be at the table to do that.”
Carney, however, showed visible irritation when asked about the state of talks as he departed the Quebec City retreat, dismissing the query as “boring.”
For critics, that response only deepened concern. Blais argued that USMCA is central to Carney’s broader ambition to diversify Canada’s exports beyond the United States.
“The strength of our economy and our ability to diversify is very much anchored in our North American competitiveness,” she said. “The more we say that there’s a rupture with that, the less attractive we become as a country to invest. “That’s the worry.”
As the rhetoric hardens and the review clock ticks down, Canada now faces a stark dilemma: double down on a defiant, values-driven foreign policy — or recalibrate its approach to preserve the trade framework that underpins its economic prosperity.
