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.

Natural Resources Minister Jonathan Wilkinson says Donald Trump’s exact tariffs plans remain unclear but he’s hearing three options for executive orders the incoming president may issue when he takes office: a 25-per-cent levy on Canadian goods, a 10-per-cent tax for all countries or an escalating tariff that starts low and rises over time.