Strategic mistake: There’s only one winner of a trade war with Canada

NEW YORK: The keenest observer of the all-out trade war between the United States and Canada is surely President Xi Jinping of China. If Washington doesn’t change course, he’s probably going to be its winner, too.

President Xi already exercises near-monopolistic control over components critical to hundreds of thousands of North American manufacturing jobs. In April 2025, Chinese restrictions on rare-earth magnets temporarily forced a Ford plant shutdown in Chicago. Later that year in Ontario, Honda reduced production of Civics and CR-Vs after Beijing restricted semiconductor exports.

These sorts of attacks and those sorts of vulnerabilities should bring allies together. In a normal world, Washington and Ottawa would be laser-focused on how much and how quickly they could manufacture together to prevent that kind of Chinese economic coercion.

Instead, President Trump has framed his dispute with Ottawa as a zero-sum fight over how much industrial capacity Canada must surrender to the US. And Trump wants almost all of it.

Prime Minister Mark Carney of Canada walked away from Trump’s latest offer and then escalated with fresh tariffs. Former Deputy Prime Minister Chrystia Freeland was correct to say it was even “a bad deal for the US.”

Trump cannot allow Canada to abandon the negotiations. Like it or not, Washington needs a resilient Canadian manufacturing sector working in concert with America’s companies in the much bigger and more consequential battle against Chinese market dominance.

Ottawa rebuffed Trump’s latest offer in part because it retained too many of his import tariffs on Canadian cars, heavy trucks, steel and aluminium. With tariffs that high, Americans will eventually stop buying Canadian-assembled vehicles, and Detroit will rework its supply chains to exclude Canadian parts. Cars and parts once moved seamlessly across the US-Canada border between suppliers and buyers, much as they did over the US-Mexico border.

Being shut out of the market next door will devastate the Canadian auto industry. Canada is not close enough to Asia or Europe to survive as part of their supply chains.

We know what will probably happen next based on what took place in Australia after its automakers disappeared. By 2017, Toyota, General Motors and Ford closed their last Australian plants and caved to economic reality: The Australian market was too small and too remote to support the scale needed for globally competitive manufacturing.

Australians at first imported cars from manufacturing hubs across Japan, Korea, Thailand, Europe and the United States. Less than 10 years later, Australia looks very different. Nearly one in three new cars bought in Australia in the first half of 2026 was made in China, up from less than one in 250 back in 2017. (Only one in 50 Australian purchases in the first five months of 2026 was made in the United States.)

Trump should expect Canadian consumers to go the same route. In January, Carney announced Canada would allow 49,000 Chinese electric vehicles to be sold in the country — less than 3% of new car sales — and would slowly increase that number. Any decision to further open the Canadian market would probably lead to a Chinese import surge.

Why is pure Econ 101. Buying higher-cost cars from the United States is easier to justify politically when there are offsetting benefits to the national economy, such as assembly jobs, profits to domestic parts suppliers and communities built around steel or aluminium plants. If local manufacturing disappears, so will the reasons for Canadians to accept paying higher prices.

Losing Canadian customers to China would be terrible for America for two reasons.

Today, Chinese companies sell low-priced cars. Tomorrow, the country could weaponise its newfound monopoly power. China has increasing market shares in sectors such as steel, aluminum, shipbuilding and telecommunications equipment. Second, losing the Canadian commercial base could turn away, once and for all, one of Washington’s few remaining economic security allies.

To fight the real trade war with China, Canadian consumers must continue to choose North American products. Washington needs Ottawa to accept current trade integration, but Trump must moderate his demands. Washington cannot dismantle Canadian industry and expect to retain the Canadian consumer, nor can the West counter Chinese market dominance without a fully united manufacturing front.