President-elect Donald Trump's threatened tariffs could prompt Canada to pursue dollar-to-dollar retaliation or an export tax on oil and gas bound for the U.S.

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.

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.