The government is preparing for the possibility that the incoming U.S. administration will impose high tariffs on Canadian goods, setting the close allies up for a showdown.

Trump continues to erroneously cast the U.S. trade deficit with Canada — a natural resource-rich nation that provides the U.S. with commodities like oil — as a subsidy.

Outgoing Canadian Prime Minister Justin Trudeau has announced the formation of a Canada-U.S. relations council to support the federal government as it deals with incoming U.S. President Donald Trump’s