As promised, United States President Donald Trump has imposed punishing tariffs on all exports from Canada and Mexico, leading to retaliatory tariffs from Canada .
Authors
- Daniel Drache
Professor Emeritus, Department of Politics, York University, Canada
- Marc D. Froese
Professor of Political Science and Founding Director, International Studies Program, Burman University
Canada's closest ally has torn up the Canada-U.S.-Mexico trade deal negotiated only seven years ago. The rationale behind what the Wall Street Journal editorial board has called " the dumbest trade war in history " isn't even clear.
The pessimistic view is that if Canada doesn't give Trump everything he wants, he will bulldoze the country with more tariffs, sanctions on banks, enhanced border inspections and even a travel ban - everything he recently threatened to do to Colombia.
Canada's political class is scrambling because the U.S. has long been a cultural sibling and an economic partner. But now it is toxic, threatening and untrustworthy. Will Canada sign another trade deal with Trump in office? The chances recede the longer the tariffs remain in place.
Iron-fisted
It's never been more clear that Trump is obsessive, seldom a bluffer and always iron-fisted. He seems to have planned and executed this tariff bomb to cause maximum pain and chaos. Now he says the European Union is next on his list.
Trump is counting on his new majorities in U.S. Congress to ram through his radical right populist agenda, forcing other countries to play a role in his melodrama.
In response to Trump's charge that the U.S. subsidizes Canadian trade, former Conservative prime minister Stephen Harper pointed out that half of America's imported oil comes from Canada , and its price is significantly discounted due to a lack of pipeline capacity. "It's actually Canada that subsidizes the United States in this regard," Harper said.
Nevertheless, Trump's preferred foreign policy tactic is to hit first with economic sanctions and negotiate later. With his near total grip on U.S. government, he can now achieve all his aims through tariffs .
The imperial presidency
Trump's vision for his imperial presidency is organized around an old idea: the revenue tariff. Before income taxes, border tariffs were the primary source of income for government . But back then, government did a lot less.
For example, America's 19th-century navy of wooden sailing ships was purchased with tariffs . But it would be impossible to fund modern-day health care, student loans and $13 billion aircraft carriers with tariff revenues.
A recent study by the Peterson Institute for International Economics shows the math doesn't add up . Tariffs are levied on imported goods and are worth about US$3 trillion. American income tax is levied on incomes and are worth more than US$20 trillion. Government would have to be much smaller, and tariffs would have to be so high they would choke American trade, for tariffs to make economic sense.
And yet Trump has a broad mandate. In the summer of 2024, the U.S. Supreme Court ruled in Trump v. United States that presidents require a broadly defined "presumptive immunity from prosecution for … official acts."
This decision has given Trump the legal clout to force the entire federal government to answer to the president himself.
War against democracy
Trump is using his vast new mandate to wage multiple wars simultaneously. These wars against the guardrails of liberal democracy require the punishment of his enemies inside his own party.
Republicans who have voted against Trump legislation during his first term faced high-profile challenges in the primaries as he funded their opponents . Today, the war is waged against those who are insufficiently loyal, including the highest ranks of the Coast Guard and the FBI .
The war against the administrative state involves the mass firing of independent inspectors , federal lawyers and thousands of civil servants to be replaced by foot soldiers personally loyal to the leader.
The Trump administration has sent out " deferred resignation " notices that invite the entire civil service to resign. This is the tactic Trump's key adviser, Elon Musk, implemented at X , and it suggests a wave of firings will soon begin.
Nonsensical trade war
The trade war against Canada and Mexico is peculiar because neither country has expressed any willingness to abolish the United States-Mexico-Canada Agreement , which is among the achievements of Trump's first administration.
Nevertheless, the paranoid Trump seems to be convinced that he got a raw deal in 2018, and so he wants to scrap the whole treaty and negotiate something tougher that brings more jobs home.
In 2024, the cars that were ranked most " American " in terms of their content and final assembly were made by Tesla, Honda and Volkswagen. By comparison, the best-selling the Dodge Ram 1500 pickup truck ranked No. 43 on the list. What Trump considers American and non-American isn't clear, even to voters.
A new Bank of Canada forecast predicts that American tariffs may reduce Canadian GDP by six per cent. The federal government is planning an enormous bailout package to compensate for widespread job losses like the one offered to businesses and individuals during the pandemic.
Unsurprisingly, Trump divides Canada's leadership. Alberta and Saskatchewan have publicly criticized the Team Canada approach. Alberta Premier Danielle Smith refused to sign the joint federal/provincial statement and played to her secessionist base.
Even so, former Alberta premier Jason Kenney recognizes the peril , arguing that Alberta needs to "be prepared to retaliate … we can't be wusses about this; we have to have a spine."
What's next?
Canada is an export-led economy based on natural resources. Its strength lies not in refusing to buy California wine or Florida orange juice. Its main sources of leverage are oil and gas, potash and uranium, rare earth minerals, timber products and hydroelectric power. But of all these, oil, uranium, and hydro-electric power are Canada's biggest guns.
It's not yet clear how effective the Canadian government's strategy will be. Previous rounds of retaliation after the steel and aluminum tariffs in Trump's first term did not drive him to the negotiating table . It's also unclear what the CEOs of Canada's branch-plant multinational corporations will do when their loyalties are divided between Trump and Canada.
Furthermore, it's anyone's guess how much the dissent of western Canadian premiers has hurt Canada's case with Trump. Certainly, his preferred tactic is to divide and conquer.
Finally, it's unclear if Ontario Premier Doug Ford's " Captain Canada " approach will earn the respect or disdain of Republicans - although, ultimately, it doesn't matter what the rest of the American political class thinks because Trump and his inner circle are calling all the shots.
In practical terms, there is little Canada can do to address the false accusations that it's complicit in the illicit drug trade and in migrants crossing the border into the U.S . Facts don't matter to Trump. He will eventually come up with a demand, and if Canada doesn't give in, he will ramp up the economic pain.
Welcome to the post-liberal world order.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
