Canadian Prime Minister Carney has announced the suspension of Canada-United States trade talks. Within hours, President Donald Trump’s new Section 338 tariffs took effect.
Early estimates project that the tariffs could cost 90,000 Canadian jobs. Until the breakdown in negotiations, the Carney government’s diplomatic posture had been highly conciliatory. Now, with trade talks exhausted and fresh economic pain on the way for both Canadians and Americans, conciliation appears to be a spent force. Instead, anger and escalation are taking centre stage.
For any country, a lopsided deal that penalises national industries is upsetting. But for Canadians, adding last-minute demands to erode sovereignty has been nothing short of enraging. Even before the escalation, 62 per cent of Canadians supported retaliation against US tariff threats. Based on the latest drama, that number may climb even higher.
What’s striking about Carney’s response, however, is how quickly and confidently he vowed dollar-for-dollar retaliation. Retaliation, however, is not just limited to tariffs. Ontario Premier Doug Ford said Trump “can kiss my ass.” Bloc Québécois leader Yves-François Blanchet is calling for Canada to suspend defence contracts.
To say this is unusual for Canadian foreign policy is an understatement. The conventional view is that, in any trade dispute, the US would quickly defeat Canada. The US has a much larger economy, is less reliant on exports to Canada, and, in theory, should more easily absorb any retaliatory measures. But this view underestimates Canada’s leverage.
As Nobel-prize winning economist Paul Krugman explains, the US imports economically vital goods from Canada like oil, lumber, electricity and aluminium, for which there is no cheap and accessible domestic substitute. Tariffs on these goods means higher costs for American consumers and businesses in an already inflationary environment.
Foreign governments are acutely aware of these economic problems, and the role they will play in the upcoming US midterm elections. For Iran, this could mean keeping oil prices high in order to punish Republicans in the midterms. For Canada, it means leaving Republicans to defend a bitterly unpopular trade war. It can also mean calibrating tariffs to target areas with vulnerable Republican House and Senate seats, like Ohio, Michigan and Maine.
Canada can’t defeat the US, can cause enough pain in the right place, and at the right time, to make a trade war politically costly. In the last 18 months, Canada’s response to the Trump administration has been driven by a specific view of the future: The Trump administration may be detestable, but it is only an anomaly and one day it will be gone. So Canada had best not do anything to jeopardise the long-term relationship.
After last weekend, a very different view of the future is emerging. In this view, Canada needed to send a pointed message that the Trump administration had crossed a red line. If the administration does not pay a political price for its aggression, then there will be nothing to deter future administrations from pursuing a similar policy. Are Canadians willing to shoulder the sacrifices required by this sharper view?