Canada Must Become Transactional Like Trump

A frequent metaphor for Canada’s role in the world is that we are a “Boy Scout” – earnest, good natured, and interested in helping others. This image is meant to drive home the fact that we are not imperialistic, militaristic, or out to bully others. Canada has usually played a supporting role to greater powers – first Britain, then the US – and placed a lot of faith in alliances or multilateralism.

Since World War Two, Canada has also developed a closer economic and military relationship with the US, including NORAD, in a period when the US was the leader of the “free world” against communism and fascism and supported the expansion of liberal democracy and capitalism. The Truman Doctrine was the rule during the Cold War instead of isolationism, and US economic and foreign policy were tempered to encourage trade and globalization.

In his two terms as President, Donald Trump is doing a complete reversal of the last 80 years of US foreign and trade policy. Under Trump’s leadership, the US bullies other nations and makes unilateral demands of allies in a series of policies that are often inconsistent and contradictory. In short, Trump is a bully to smaller, weaker nations. At the same time, he has a strange affinity for authoritarian, populist, or illiberal leaders. Trump is kind towards Argentina and Saudi Arabia, and soft on Putin. Only Xi Jinping in China has achieved much to counter Trump, despite China being a target of Trump, because China has rare earth materials as leverage.

One word often used to describe Trump is “transactional”. Trump is not pushing the US towards total self-sufficiency or autarky, but to a situation where the US unilaterally sets the terms of trade. The US wants to repatriate manufacturing jobs and put up barriers to imports, except in sectors where the US clearly cannot be self-sufficient. That being said, even on aluminum, Trump fails to understand that Canada’s advantage in aluminum is due to Quebec’s massive access to cheap hydro power.

Around 75% of Canada exports currently go to the US. Prime Minister Carney likes to state that 85% of Canada’s exports to the US are currently tariff free. Yet, even if we tore up CUSMA/USMCA, Trump would not likely block US imports of things like oil, gas, electricity, and other essential resources the US needs. Blocking Canadian imports would not only starve the American economy of needed inputs, it would also add to US inflation or even cause serious economic disruptions.

Experts on trade like Barry Appleton have been critical of Canada’s lack of a plan to negotiate effectively. The Prime Minister is now essentially waiting for the upcoming trilateral CUSMA negotiations to deal with Trump’s 25% tariffs on autos, softwood, and other sectors. Trump is currently justifying these sectoral tariffs on national security grounds, but this national security pretext is going before the US Supreme Court and likely will be struck down. If the Democrats win control of the House in a year, they might be able to reverse the tariffs themselves.

Canada cannot place all our hope on these possibilities, or on the US political context changing on its own after the next US election in 2028.

The Carney government intends to double our trade with the nations taking the 25% of Canadian exports that do not go to the US. That is too little too late, might not be achievable, and ignores that our main trading advantage is our shared border with the US, and proximity to the US market over all others.

In short, Canada cannot just give up, but rather has to force Trump to return the Canada-US trade relationship to one of equals negotiating in good faith instead of one where one side constantly bullies the other, with no guarantee that the bullying will stop with any formal written trade deal.

If Trump is transactional and willing to use whatever cards are at his disposal to get his way, without regards to ethics or fairness or even the truth, Canada has to respond by using whatever cards we have – much as China has used its near monopoly on rare earths to get Trump to retreat.

The cards Canada has, unlike any other nation, are on US national defense and security. Canada is in NATO with the US and other countries, but is the only other member of NORAD besides the US. Trump wants Canada to be part of the Golden Dome missile defense project, despite the end of the Cold War and the impossibility of an all-out war (nuclear or conventional) with Russia or China that would extend to this continent.

It seems ridiculous that Canada would agree to closer military and defense integration with the US at the same time that the US treats us as an enemy or national security threat on trade. Canada has to threaten breaking off nearly all direct defense co-operation with the US, essentially copying the approach of Mexico, Brazil, and other nations in this hemisphere that are not militarily integrated with the US.

This does not mean that Canada must become isolationist as Switzerland is, or Sweden was. But Canada must become transactional in our relationship with the US – though we can continue to work with the US on an ad hoc basis on some issues. Even if we left NATO, we could still sign agreements to work with other allies and go around the US where we can, including by minimizing military purchases from the US.

Canada need not spend 5% of our GDP on defense as the Carney government currently intends, but instead set it at 3.5% or less. Russia or China are not going to land troops on Baffin Island and claim ownership, and we can work with Europe on Arctic defense going forward. Setting aside national unity, Canada’s main existential threats are actually from the US itself. Protecting Canada’s economy, sovereignty, and culture need to be our priorities – not military spending.

Some have suggested a closer trading relationship with China, but we would do well to remember the two Michaels and our lack of power in that dispute. China is a non-market economy, and CUSMA precludes us from signing a free trade deal with China without US permission. In addition, most of what we sell to the manufacturing giant China consists of resources and commodities. If we signed a free trade deal with China, Canada would have to give up on manufacturing altogether and not compete with Germany, Japan, Britain, or the US but accept being a commodity exporter like Chile or Argentina.

Carney has to take a bolder, more immediate strategy against Trump’s attacks on Canada’s economic interests. Canada has to use whatever cards or leverage we have, even if it goes against the inclination we have held since World War Two to work with the US as an ally. Canada should reduce our reliance on the US, but beating back Trump’s economic assault on the 75% of trade we do with the US makes more sense than hoping we can double trade with the countries where we do 25% of our business now.