Note that "Canada" is not a simple singular viewpoint.  there is probably no "best" approach that perfectly satisfies all parties.  Even more so, "Trump" isn't a coherent agent that can be modeled simply.

Some basics that I'd use to suggest a path:

• Appeasement doesn't work.  Trying to find a compromise or agreement of how much is enough is likely to be pushed further against you.  Even more so with this particular counterparty, who isn't known for fair dealing.
• Tariffs generally hurt the country who collects them more than the countries whose exports are taxed.  It's US Citizens who are harmed by Canadian goods being far more expensive.
  • Not entirely, though.  The simple result of tariffs is less trade, which is bad for both sides.
• Long-term, a dependency relationship is going to feel abusive.  Assymetry hurts.  Canada should seek a more balanced non-US-centric trade network.

Most of this points to: don't negotiate or retaliate, just announce that Canada continues to seek free trade, and sees the value to Canadian citizens of trade with all nations.  Trump is within his rights to punish the US Citizens with high duties, but Canadians don't see the point and intend to maintain low duties and easy trade.