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.

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.