When President-elect Donald Trump recently floated the idea of annexing Canada, a key reason he gave was a claim that the United States was “losing $200 billion a year” to its northern neighbor.

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.

Canadian Prime Minister Justin Trudeau has suggested that President-elect Donald Trump’s remarks about Canada becoming America’s “51st state” is distracting the public from the harm that steep tariffs would have on U.